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THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A  TREATISE  ON  THE 

FEDERAL  ESTATE  TAX 

CONTAINING  THE  STATUTES,  REGULATIONS,  COURT  DECISIONS, 

TREASURY  DECISIONS,  OTHER   DEPARTMENTAL 

RULINGS,   AND   FORMS 


RAYMOND  D.  THURBER 

OF    THE    NEW    YORK    CITY    BAR 

Formerly  Attorney  in  the   Law  Department,   Bureau  of 
Internal   Revenue,   Washington,   D.   C. 


Albany,  N.  Y. 
MATTHEW  BENDER  &  COMPANY 

INCORPORATED 
1921 


Copyright,   1921 
By  RAYMOND  D.  THURBER 


PREFACE. 


The  present  Federal  Estate  Tax  has  now  been  in 
existence  over  four  years.1 

In  that  time  it  has  yielded  in  revenue  approxi- 
mately $300,000,000.  Present  financial  conditions 
indicate  that  a  repeal  of  the  tax  in  the  near  future 
is  not  to  be  expected.  It  is  consequently  a  matter  of 
serious  concern  to  all  estates  of  residents  of  the 
United  States  in  excess  of  $50,000,  and  to  the  attor- 
neys representing  them.  It  is  also  important  to  the 
estates  of  all  non-residents,  regardless  of  amount, 
any  of  the  property  of  which  was  situated  in  this 
country  at  the  time  of  the  decedent's  death. 

The  present  book  is  due  to  the  belief  that  there  is 
need  for  a  treatise  relating  solely  to  the  Federal 
Act — a  subject  more  important,  from  a  revenue 
standpoint,  than  the  inheritance  tax  statutes  of  all 
of  the  States  combined. 

The  writer  was  connected  for  several  years  with 
the  Law  Department  of  the  Bureau  of  Internal 
Revenue,  and  assisted  in  the  preparation  of  the  pres- 
ent Estate  Tax  Regulations.  This  book,  in  addition 
to  giving  the  law  and  all  constructions  of  it  by  the 
courts,  also  attempts  to  set  out  accurately  the  pres- 
ent working  construction  of  the  law  by  the  Bureau 
of  Internal  Revenue,  as  indicated  not  only  by  the 

1.  The  first  Act  went  into  effect  on  September  9,  1916  (39 
Stat.,  Chap.  463,  see.  902). 

[iii] 


686151 


iv  PREFACE. 

Regulations  and  Treasury  Decisions,  but  also  by- 
other  sources  of  information,  not  at  present  avail- 
able to  the  public  in  systematic  form.  The  lawyer 
may  thus  not  only  form  his  own  judgment  as  to  the 
rights  of  his  client,  but  learn  what  rulings  he  may 
reasonably  expect  to  obtain  from  the  Bureau. 

The  book  is  dedicated  to  all  executors  and  ad- 
ministrators and  their  attorneys,  in  the  hope  that  it 
will  be  helpful  to  them. 

New  York,  N.  Y.,  April  4,  1921. 


TABLE  OF  CONTENTS. 

References  are  to  Pages. 

PAGE 

Preface iii 

List   of  Forms vii 

Table  of  Cases ix 

CHAPTER  I. 
Introductory 1 

CHAPTER  II. 
Gross  Estate 17 

CHAPTER  III. 
Valuation  of  Property 93 

CHAPTER  IV. 
Deductions 116 

CHAPTER  V. 
Sixtj'-day  Notice 168 

CHAPTER  VI. 
Return 182 

CHAPTER  VII. 
Payment  of  Tax 196 

CHAPTER  VIII. 
Collection  of  Tax 214 

CHAPTER  IX. 
Power  to  Compromise  or  Remit 217 

CHAPTER  X. 
Miscellaneous 221 

Table    of    Statutes 243 

Treasury  Decisions 244 

Forms 353 

Recent   Changes  in  Regulations 391 

Index 401 

[v] 


LIST  OF  FORMS. 


References  are  to  Pages. 

PAGE 

Affidavit  of  ownership  of  bonds  taken  in  payment 378 

Analysis  of  surplus  of  corporation 387,  388 

Balance  sheet  of  corporation,  adjusted 385,  386 

Balance  sheet  of  corporation,  comparative 383,  384 

Comparative   summaries  of  corporations 389,  390 

Deposition  for  estate  tax 380,  381 

Military  exemption,  claim  for 357,  358 

Receipt    for   tax 382 

Release  of  lien,  application  for 358  to  360 

Release  of  lien,  certificate  of 381 

Return  of  executor 360   to  373 

Schedule  of  coupon  bonds  received  in  payment  of  tax 379 

Schedule    of    registered    bonds    received    in    payment    of 

tax 379,  380 

Sixty-day  notice — Estate  of  nonresident 373  to  375 

Sixty-day  notice — Estate  of  resident 353,  354 

Sixty-day    notice    for    insurance    companies — Estate    of 

resident 355,  356 

Sixty-day  notice  for  insurance  companies — Estate  of  non- 
resident  356,  357 

Sixty-day  notice  for  transfer  agents — Estate  of  nonresi- 
dent  375  to  377 

Subpoena  duces  tecum  for  use  of  revenue  agent 380 

Summary   of   investigation 377,  378 


[vii] 


TABLE  OF  CASES. 


References  are  to  Pages. 


A  PAGE 

Abstract   &    Title   Guaranty   Company   v.    State,   173   Cal. 

691,  161  Pac.  Rep.  264 46 

Adye  v.  Smith,  44  Conn.  60 158 

Altman's  Estate,  In  re,  87  Misc.  255,  149  N.  Y.  Supp.  601.  158 

Alvany  v.  Powell,  55  N.  C.  51 89 

Attorney  General  v.  Clark,  222  Mass.  291,  110  N.  E.  Rep. 

299 67 

B 

Babcock,  In  re,  115  N.  Y.  450,  22  N.  E.  Rep.  263 133 

Bailey  v.  Clark,  21  Wall.  284 35 

Baker,  Matter  of,  83  App.  Div.  530,  82  N.  Y.  Supp.  390, 

aff'd  178  N.   Y.  575 40,    45 

Balls  v.  Dampman,  69  Md.  390 77 

Barbey's  Estate,  In  re,  114  N.  Y.  Supp.  725 31 

Benton,  In  re  Estate  of,  234  111.  366,  84  N.  E.  Rep.  1026. . .  46 
Bierstadt,  Matter  of,  178  App.  Div.  836,  166  N.  Y.  Supp. 

168 139,  140 

Billings  v.  People,  189  111.  472,  59  N.  E.  Rep.  798,  aff'd 

188  U.   S.  97 32 

Birdsall,  Matter  of,  22  Misc.  180,  49  N.  Y.  Supp.  450 46 

Blacklock  v.  United  States,  208  U.  S.  75 215 

Blaekstone  v.  Miller,  188  U.  S.  189 89 

Blum  v.  Wardell,  U.  S.  Dist.  Court,  N.  D.  Cal.,  Rudkin,  J. .     61 

Borden's  Estate,  In  re,  159  N.  Y.  Supp.  346 56,  102 

Bostwick,  Matter  of,  160  N.  Y.  489,  55  N.  E.  Rep.  208. .  .53,    54 

Brady  v.  Anderson,  240  Fed.  Rep.  665 134 

Brandreth's  Estate,  In  re,  169  N.  Y.  437,  62  N.  E.  Rep. 

563 49 

[ix] 


X 


TABLE  OF  CASES. 


References  are  to  Pages. 


PAGE 

Brushaber  v.  Union  Pacific  R.  R.  Co.,  240  U.  S.  1 38,  67 

Bullard,  Matter  of,  76  App.  Div.  207,  78  N.  Y.  Supp.  491. .  45 
Bullen's  Estate,  In  re,  47  Utah  96,  151  Pac.  Rep.  533. .  .27,    32 

Burdick's  Estate,  In  re,  112  Cal.  387,  44  Pac.  Rep.  734 59 

Burgheimer's  Estate,  In  re,  154  N.  Y.  Supp.  943 103 

c 

Cahen  v.  Brewster,  203  U.  S.  543 38 

Callahan  v.  Woodbridge,  171  Mass.  595,  51  N.  E.  Rep.  176.  89 

Carpenter  v.  Commonwealth,  17  How.  456 38 

Castner  v.  Farmers  Mutual  Fire  Ins.  Co.,  50  Mich.  273,  15 

N.   W.  Rep.  452 205 

Chamberlain  v.  Stearns,  111  Mass.  267 158 

Chanler  v.  Kelsey,  205  U.  S.  466 72 

Chase  v.  Inhabitants  of  Surry,  88  Me.  468,  34  Atl.  Rep. 

270 205 

Cohen  v.  Samuels,  245  U.  S.  50 84 

Commonwealth  v.  Duffield,  12  Pa.  St.  277 77 

Commonwealth  v.  Herman,  16  Wkly.  Notes  of  Cases  (Pa.) 

210 85 

Commonwealth  v.  Williams,  13  Pa.  St.  29 76,  77 

Commonwealth 's  Appeal,  34  Pa.  St.  204 32 

Conway's  Estate  v.   State,  120  N.  E.  Rep.    (App.   Ct.  of 

Ind.)  717 41,  42,  46 

Cope  v.  Cope,  137  U.  S.  682 35 

Corbin  v.  Townshend,  92  Conn.  501,  103  Atl.  Rep.  647. .. .  139 

Cornell's  Estate,  In  re,  170  N.  Y.  423,  63  N.  E.  Rep.  445. .  49 
Cory's  Estate,  In  re,  177  App.  Div.  871,  164  N.  Y.  Supp. 

956,  aff'd  221  N.  Y.  Memo.  612,  117  N.  E.  Rep.  1065. .  103 

Crary,  Matter  of,  31  Misc.  72,  64  N.  Y.  Supp.  566 46 

Crenshaw  v.  Moore,  124  Tenn.  528,  137  S.  W.  Rep.  924. .. .  32 

Crocker  v.  Shaw,  174  Mass.  266,  54  N.  E.  Rep.  549 49 

Cruger,  In  re,  54  App.  Div.  405,  66  N.  Y.  Supp.  636 50 

Cutting  v.  Cutting,  86  N.  Y.  522 77 


TABLE  OF  CASES. 


References  are  to  Pages. 


J)  PACK 

Dalsimer,  Matter  of,  167  App.  Div.  365,  153  N.  Y.  Supp. 

58,  aff 'd  217  N.  Y.  608,  111  N.  E.  Rep.  1085. . .  .67,  68,  69 
Daly's  Estate,  In  re,  100  App.  Div.  (N.  Y.)  373,  91  N.  Y. 

Supp.  858,  aff 'd  182  N.  Y.  524,  74  N.  E.  Rep.  1116. ...  89 
Dana  Company,  Matter  of  William  B.,  215  N.  Y.  461,  109 

N.   E.   Rep.  557 53,    54 

Dee's  Estate,  In  re,  210  N.  Y.  625,  104  N.  E.  Rep.  1128, 

aff'g  148  N.   Y.   Supp.  423 46 

DeGraaf 's  Estate,  In  re,  24  Misc.  147,  53  N.  Y.  Supp.  591. .     31 

De Vaughn  v.  Hutchinson,  165  U.  S.  566 30 

Dolbeer,  Matter  of,  226  N.  Y.  623,  123  N.  E.  Rep.  381 70 

Douglas  County  v.  Kountze,  84  Neb.  506,  121  N.  W.  Rep. 

593 49 

Douglass's  Estate,  In  re,  104  Misc.  359,  171  N.  Y.  Supp. 

956 5 

Dunglison's  Estate,  In  re,  201  Pa.  St.  592,  51  Atl.  Rep. 

356 77 

Durfee,  Matter  of,  79  Misc.  655,  140  N.  Y.  Supp.  594. .  .62,     69 

E 

Ebersole   v.   McGrath,  U.   S.   Dist.   Court,   Southern   Dist. 

Ohio,  Peck,  J 78 

Edgerton,  Matter  of,  35  App.  Div.  125,  54  N.  Y.  Supp.  700, 

aff 'd  158  N.  Y.  671,  52  N.  E.  Rep.  1124 45,    52 

Emmons  v.  Shaw,  171  Mass.  410,  50  N.  E.  Rep.  1033 76 

Evans-Snider-Buel  Co.  v.  McFadden,  105  Fed.  Rep.  293, 

aff 'd  185  U.  S.  505 67 

F 

Finn  v.  United  States,  123  U.  S.  227 242 

Flint  v.  Stone  Tracy  Co.,  220  U.  S.  108 67 

Freund's  Estate,  In  re,  143  App.  Div.  335,  128  N.  Y.  Supp. 

48,  aff'd,  on  opinion  below,  202  N.  Y.  556,  95  N.  E. 

Rep.  1129 133 

Fuller  v.  Gale,  103  Atl.  Rep.  (N.  H.)  308 5 


TABLE  OF  CASES. 


Keferences  are  to  Pages. 


Q  PAGE 

Gaither  v.  Miles,  U.   S.  Dist.   Court,  Dist.  of  Md.,  Rose, 

D.    J 84,  85 

Garcia,  Matter  of,  183  App.  Div.  712,  170  N.  Y.  Supp.  980.  223 
German  Corp.  of  Negaunee  v.  Negaunee  German  Aid  So- 
ciety, 172  Mich.  650,  138  N.  W.  Rep.  343 158 

Gihon,  Matter  of,  169  N.  Y.  443,  62  N.  E.  Rep.  561 139 

Gordon,  Matter  of,  186  N.  Y.  471,  79  N.  E.  Rep.  722 92 

Gould,  Matter  of,  19  App.  Div.  352,  46  N.  Y.  Supp.  506, 

156  N.  Y.  423,  51  N.  E.  Rep.  287 96 

Graves,  Matter  of,  52  Misc.  433,  103  N.  Y.  Supp.  571 69 

Green's  Estate,  In  re,  153  N.  Y.  223,  47  N.  E.  Rep.  292. .. .  49 

H 

Hagerty  v.  State,  55  Ohio  St.  613,  45  N.  E.  Rep.  1046 56 

Hamlin,  In  re,  226  N.  Y.  407,  124  N.  E.  Rep.  1 5,  139 

Harbeck,  In  re,  161  N.  Y.  211,  55  N.  E.  Rep.  850 76 

Hegeman's  Executors  v.  Roome,  70  N.  J.  Eq.  562,  62  Atl. 

Rep.  392 158 

Herold  v.  Blair,  158  Fed.  Rep.  804 56 

Hooper  v.  Shaw,  176  Mass.  190,  57  N.  E.  Rep.  361 140 

Hopkins,  Appeal  of,  77  Conn.  644,  60  Atl.  Rep.  657 223 

Hornsby  v.  United  States,  10  Wall.  224 21 

Houdayer's  Estate,  In  re,  150  N.  Y.  37,  44  N.  E.  Rep.  718. .  89 

Hunt  v.  Wicht,  174  Cal.  205,  162  Pac.  Rep.  639 67 

Hunter  v.  Husted,  45  N.  C.  141 223 

J 

Johnson  v.  Southern  Pacific  Co.,  196  U.  S.  1 35 

K 

King's  Estate,  In  re,  14  Wkly.  Notes  77 77 

Kingsbury  v.  Chapin,  196  Mass.  533,  82  N.  E.  Rep.  700. .. .  101 
Kissam  v.   McElligott,  U.   S.  Dist.  Court,  Southern  Dist. 

N.  Y.,  Mayer,  J 65 

Kitts  v.  Kitts,  135  Tenn.  314 30 


TABLE  OF  CASKS.  xiii 
References  are  to  Pages. 

PAGE 

Klatzl,  Matter  of,  216  N.  Y.  83,  110  N.  E.  Rep.  181 71 

Kline,  Matter  of,  65  Misc.  446,  121  N.  Y.  Supp.  1090. .  .62,  69 

Knight's  Estate,  In  re,  261  Pa.  St.  537,  104  Atl.  Rep.  765. .  139 

Knowlton  v.  Moore,  178  U.  S.  41 2,  56,  221 

L 

Lederer  v.  Northern  Trust  Co.,  262  Fed.  Rep.  52 136,  137 

Lederer  v.  Pearce,  266  Fed.  Rep.  497,  aff'g  262  Fed.  Rep. 

993 77,  78 

Lines 's  Estate,  In  re,  155  Pa.  St.  378,  26  Atl.  Rep.  728. . .  49 
Liverpool  &  London  &  Globe  Ins.  Co.  v.  Board  of  Assessors, 

221  U.  S.  346 89 

Lovitt  v.  Attorney  General,  33  Can.  Sup.  Ct.  350 85 

M 

Mahlstedt,  Matter  of,  67  App.  Div.  176,  73  N.  Y.  Supp. 

818 45 

Masury,  Matter  of,  28  App.  Div.  580,  aff'd  159  N.  Y.  532. .  53 

Maxwell  v.  Bugbee,  250  U.  S.  525 67 

McDaniel  v.  Byrkett,  179  S.  W.  Rep.  (Ark.)  491 32 

McDougald   v.   Wulzen,   34   Cal.   App.   21,   166   Pac.   Rep. 

1033 46 

McKelway,  Matter  of,  221  N.  Y.  15, 116  N.  E.  Rep.  348 .. .  66,  70 

Merck  v.  Treat,  174  Fed.  Rep.  388 241 

Merrifield,  Estate  of  v.  People,  212  111.  400,  72  N.  E.  Rep. 

446 46 

Meyer,  Matter  of,  209  N.  Y.  386,  103  N.  E.  Rep.  713 223 

Mitchell  v.  Clark,  110  U.  S.  633 67 

Moffitt  v.  Kelly,  218  U.  S.  400 59 

Moffitt's  Estate,  In  re,  153  Cal.  389,  95  Pac.  Rep.  653,  aff'd 

sub  nom.  Moffitt  v.  Kelly,  218  U.  S.  400 59 

Moir's  Estate,  In  re,  207  111.  180,  69  N.  E.  Rep.  905. . .  .49,    51 

Murdock  v.  Bridges,  91  Me.  124,  39  Atl.  Rep.  475 158 

N 

New  England  Trust  Co.  v.  Abbott,  205  Mass.  279,  91  N.  E. 

Rep.  379 50 


xiv  TABLE  OF  CASES. 

References  are  to  Pages. 

PAGE 

New  York  Trust  Co.  v.  Eisner,  263  Fed.  Rep.  620.. 5,  137,  138 
Northern  Trust  Co.  v.  Lederer,  257  Fed.  Rep.  812,  aff  M  sub 

nom.   Lederer  v.   Northern   Trust   Co.,  262  Fed.   Rep. 

52 136,  138 

0 

Orr  v.  Gilman,  183  U.  S.  278 72,    85 

Orvis's  Estate,  In  re,  223  N.  Y.  1,  119  N.  E.  Rep.  88. . .  .56,  103 

P 

Palmer  v.  Mansfield,  222  Mass.  263,  110  N.  E.  Rep.  283. . .  71 
Palmer,  Matter  of,  117  App.  Div.  360,  102  N.  Y.  Supp.  236.  45 
Patterson's  Estate,  In  re,  127  N.  Y.  Supp.  284,  aff'd  146 

App.  Div.  286,  130  N.  Y.  Supp.  970 50 

Peiser  v.  Griffin,  125  Cal.  9,  57  Pac.  Rep.  690 59 

Pell,  Matter  of,  171  N.  Y.  48,  63  N.  E.  Rep.  789 66,     67 

People  v.  Burkhalter,  247  111.  600,  93  N.  E.  Rep.  379 46 

People  v.  Carpenter,  264  111.  400,  106  N.  E.  Rep.  302 42 

People  v.  Danks,  289  111.  542,  124  N.  E.  Rep.  625 42 

People  v.  Field,  248  111.  147,  93  N.  E.  Rep.  721 32 

People  v.  Griffith,  245  111.  532,  92  N.  E.  Rep.  313 89 

People  v.  Kelley,  218  111.  509,  75  N.  E.  Rep.  1038. .  .46,  49,  51 
People  v.  Northern  Trust  Co.,  289  111.  475,  124  N.  E.  Rep. 

662 53,  139 

People  v.  Pasfield,  284  111.  450,  120  N.  E.  Rep.  286 139 

People  v.  Powers,  147  N.  Y.  104,  41  N.  E.  Rep.  432 158 

Plummer  v.  Coler,  178  U.  S.  115 67,    85 

Plunkett  v.  Old  Colony  Trust  Co.,  233  Mass.  471,  124  N.  E. 

Rep.  265 5,  139 

Polk  v.  Miles,  268  Fed.  Rep.  175 47,    52 

Prentiss  v.  Eisner,  267  Fed.  Rep.  16 138 

Price,  Matter  of,  62  Misc.  149,  116  N.  Y.  Supp.  283 46 

Public  Service  Railway  Co.  v.  Herold,  219  Fed.  Rep.  301. .  .241 

R 

Ramsdill,  Matter  of,  190  N.  Y.  492,  83  N.  E.  Rep.  584. .. .  101 
Randolph  v.  Craig,  267  Fed.  Rep.  993 29 


TABLE  OF  CASES.  xv 
References  are  to  Pages. 

PAGE 

Reed,  Matter  of,  89  Misc.  632,  154  N.  Y.  Supp.  247 69 

Reish  v.  Commonwealth,  106  Pa.  St.  521 52 

Reynolds,  Estate  of,  169  Cal.  600,  147  Pac.  Rep.  268. . .  .42,  46 

Ridden  v.  Thrall,  125  N.  Y.  572 41 

Riemann's  Estate,  In  re,  42  Misc.   (N.  Y.)   648,  87  N.  Y. 

Supp.  731 31,  32 

Roebling's  Estate,  In  re,  104  Atl.  Rep.  295  (N.  J.) 139 

Romaine's  Estate,  In  re,  127  N.  Y.  80,  27  N.  E.  Rep.  759. .  89 

Rosenberg's  Estate,  In  re,  114  N.  Y.  Supp.  726 62,  69 

Rosenthal  v.  People,  211  111.  306,  71  N.  E.  Rep.  1121.. 41,  46 

s 

Sammon,  In  re,  3  Mees.  &  W.  381 223 

Sanford's  Estate,  In  re,  91  Neb.  752,  137  N.  W.  Rep.  864 

(on    rehearing,   overruling   original    decision,    90    Neb. 

410,  133  N.  W.  Rep.  870) 31,  32 

Sayre  v.  Brewster,  U.  S.  Dist.  Court,  N.  D.  N.  Y.,  Ray,  J.  137 
Schwarzchild  &  Sulzberger  Co.  v.  Rucker,  143  Fed.  Rep. 

656 241 

Sherman,  Matter  of,  179  App.  Div.  497,  166  N.  Y.  Supp. 

19,  aff 'd  222  N.  Y.  540,  118  N.  E.  Rep.  1078. . .  .5,  139,  140 
Shwab   v.   Doyle,   Circuit   Court   of   Appeals,   6th   Circuit, 

Dec.    10,    1920 35,37,  43 

Sinking  Fund  Cases,  99  U.  S.  700 67 

Slaughter  House  Cases,  16  Wall.  36 21 

Snyder  v.  Bettman,  190  U.  S.  249 67 

Spaulding,  Matter  of,  49  App.  Div.  541,  63  N.  Y.  Supp. 

694 41,    45 

Spreckels  v.  Spreckels,  116  Cal.  339,  48  Pac.  Rep.  228 59 

Spreckels  v.  State,  30  Cal.  App.  363,  158  Pac.  Rep.  549. . .  46 

State  v.  Dalrymple,  70  Md.  294,  17  Atl.  Rep.  82 89.  223 

State  v.  Pabst,  139  Wis.  561,  121  N.  W.  Rep.  351 42,    46 

State  v.  Probate  Court,  130  Minn.  210,  166  N.  W.  Rep.  125.  139 
State  Line  &  Sullivan  R.  R.  Co.  v.  Davis,  228  Fed.  Rep. 

246 241 

State  Street  Trust  Co.  v.  Stevens,  209  Mass.  373,  95  N.  E. 

Rep.   851 50 


xvi  TABLE  OF  CASES. 


References  are  to  Pages. 


PAGE 

Stebbins,  Matter  of,  52  Misc.  438,  103  N.  Y.  Supp.  563 69 

Stockdale  v.  Insurance  Companies,  20  Wall.  323 38 

Strahan's   Estate,   In   re,  93   Neb.   828,   142   N.   W.   Rep. 

678 26,  27,  29,    32 

Strode  v.  Commonwealth,  52  Pa.  St.  181 85 

Stuyvesant's  Estate,  In  re,  72  Misc.  295,  131  N.  Y.  Supp. 

197 31 

Swaby 's  Appeal,  In  re,  14  Wkly.  Notes,  553 77 

T 

Thompson,  Matter  of,  167  App.  Div.  356,  153  N.  Y.  Supp. 

164,  aff  'd  217  N.  Y.  609,  111  N.  E.  Rep.  1101 67,  68 

Thorne,  Matter  of,  44  App.  Div.  8,  60  N.  Y.   Supp.  419, 

aff'd  162  N.  Y.  238,  56  N.  E.  Rep.  625 52 

Tilley,  Matter  of,  166  App.  Div.  240,  151  N.  Y.  Supp.  79, 

aff'd  215  N.  Y.  702,  109  N.  E.  Rep.  1094 67,  68,  69 

u 

Ullmann  v.  Smietanka,  U.  S.  Dist.  Ct.,  N.  D.  of  111 202 

United  States  v.  Coulby,  251  Fed.  Rep.  982 35 

United  States  v.  Perkins,  163  U.  S.  625 67 

United  States  v.  Utz,  80  Fed.  Rep.  848 242 

V 

Van  Syckel  v.  Johnson,  80  N.  J.  Eq.  117,  70  Atl.  Rep.  657. .  158 

Von  Bernuth's  Estate,  In  re,  143  N.  Y.  Supp.  672 69 

w 

Walker  v.  People,  192  111.  106,  61  N.  E.  Rep.  489 96 

Weed's  Estate,  In  re,  10  Misc.  628,  32  N.  Y.  Supp.  777. .. .  223 
Weiler's  Estate,  In  re,  122  N.  Y.  Supp.  608,  aff'd  139  App. 

Div.  905,  124  N.  Y.  Supp.  1133 32 

Wetmore  v.  Markoe,  196  U.  S.  68 35 

Whiting's  Estate,  In  re,  150  N.  Y.  27,  44  N.  E.  Rep.  715. .  89 

Williams  v.  Osenton,  232  U.  S.  619 8 

Winn  v.  Schenck,  33  Ky.  Law  Rep.  615,  110  S.  W.  Rep. 

827 76 

Wright's  Appeal,  38  Pa.  St.  507 49 


CHAPTER  I. 
INTRODUCTORY. 

§  1.  Inheritance  taxes  in  general. 

Inheritance  taxes  are  a  familiar  form  of  taxation, 
in  use  in  the  United  States  for  many  years.1  In 
this  country  it  has,  until  the  passage  of  the  re- 
cent estate  tax  legislation,  been  employed  princi- 
pally by  the  various  states;  but  the  Federal  Govern- 
ment has  also  used  this  means  of  raising  money  on 
a  number  of  prior  occasions.2 

The  power  of  the  Federal  Government  to  adopt 
this  means   of  taxation  is  now  established.     The 

1.  For  complete  exposition  of  the  law  as  it  exists  in  the 
various  States  today,  see  the  Standard  Work  of  Gleason  & 
Otis  on  Inheritance  Taxation,  Second  Edition. 

2.  See  Act  of  July  6,  1797,  Chap.  XI;  1  Stat.  527  (tax  on 
legacies  and  distributive  shares  of  personal  property,  in  the 
form  of  a  stamp  duty  upon  receipts  therefor) ;  Act  of  July  1, 
1862,  Chap.  119,  Sees.  Ill,  112;  12  Stat.  432,  485-6  (tax  on 
legacies  and  distributive  shares  of  personal  property,  to  be 
paid  by  executor);  Idem,  Sec.  94;  12  Stat.  475,  483  (stamp 
duty  on  probate  of  will  or  letters  of  administration) ;  Act  of 
July  30,  1864,  Chap.  173,  Sees.  124,  125;  13  Stat.  223,  285-7 
(tax  on  legacies  and  distributive  shares  of  personal  property, 
to  be  paid  by  executor) ;  Idem,  Sees.  127,  133;  13  Stat.,  pp.  287-9 
(tax  on  "successions"  to  real  property  either  by  deed  or  will) ; 
Idem,  Sec.  151;  13  Stat.  291-2,  300  (stamp  duty  on  probate  of 
wills  or  letters  of  administration) ;  Act  of  July  13,  1866,  Chap. 
184,  Sec.  9;  14  Stat.  98,  140  (amending  Act  of  June  30,  1864) ; 
Act  of  August  27,  1894,  Chap.  349,  Sec.  28;  28  Stat.  509,  553 
(tax  on  acquisition  of  property  by  inheritance  through  inclu- 

[1] 


FEDERAL  ESTATE  TAX. 


The  present  legislation. 


question  was  elaborately  considered  in  Knowlton  v. 
Moore,3  which  decided,  in  substance,  that  although 
it  is  within  the  exclusive  jurisdiction  of  the  various 
States  to  prescribe  the  manner  in  which  property 
shall  pass  from  the  dead  to  the  living,  yet  the  occa- 
sion of  the  transmission  under  the  State  law  may  be 
taxed  by  the  Federal  Government  under  its  general 
power  to  lay  taxes.4 

§  2.  The  present  legislation. 

The  present  Federal  Estate  Tax  Law  consists  of 
four  statutes,  viz,  the  original  Estate  Tax  Law,  con- 
tained in  Title  II  of  the  Act  of  September  8,  1916, 
known  as  the  " Revenue  Act  of  1916"  (39  Stat., 
Chap.  463,  pp.  777-80) ;  Title  in  of  the  Act  of  March 
3,  1917  (39  Stat.  Chap.  159,  p.  1002) ;  Title  IX  of 
the  Act  of  October  3,  1917,  known  as  the  "Revenue 
Act  of  1917"  (40  Stat.,  Chap.  63,  pp.  324-5);  and 
the  present  Estate  Tax  Law,  contained  in  Title  IV 

sion  of  same  in  taxable  income) ;  Act  of  June  13,  1898,  Chap. 
448,  Sees.  29,  30;  30  Stat.  448,  464-6  (tax  on  legacies  and  dis- 
tributive shares  of  personal  property,  to  be  paid  by  executor. 

It  will  be  observed  that  all  of  these  taxes  were  war  taxes, 
subsequently  repealed. 

Most  of  this  federal  legislation  has  its  counterpart  in  similar 
statutes  passed  in  England.  (See  16  and  17  Viet.,  Chap.  51; 
44  and  45  Vict.,  Chap  12,  Sec.  38;  52  and  53  Vict.,  Chap.  7,  Sec. 
II;  57  and  58  Vict.,  Chap.  30.) 

3.  178  U.  S.  41. 

4.  See  178  U.  S.,  pp.  57-61.  The  court  in  this  case  was  con- 
sidering the  legacy  tax  act  of  June  13,  1898  (30  Stat.  448, 
464-6). 


INTRODUCTORY. 


Scheme  of  the  present  statute. 


of  the  Act  of  February  24,  1919,  known  as  the 
"Revenue  Act  of  1918"  (40  Stat.,  Chap.  18,  pp.  1096- 
1101).  The  Act  last  mentioned  supersedes  Title  IT 
of  the  Act  of  1916;  but  it  applies  (Sec.  401)  only  to 
the  estates  of  decedents  dying  after  its  passage 
(February  24,  1919),  and  contains  the  usual  saving 
clause  as  to  rights  already  accrued.  (Sec.  1400  [b]  ).5 
At  the  present  time,  therefore,  constant  reference 
to  the  earlier  statutes  is  necessary.  The  two  Acts 
of  1917  require  but  little  attention.  That  of  March 
3,  1917,  raises  the  rates  of  tax  contained  in  the  "Reve- 
nue Act  of  1916.  The  Act  of  October  3,  1917,  im- 
poses a  further  tax,  in  addition  to  that  already  laid, 
but  provides  that  it  shall  not  apply  to  the  estates  of 
persons  dying  while  serving  in  the  military  or  naval 
forces  during  the  present  war,  or  as  the  result  of  in- 
jury or  disease  contracted  in  such  service.  Title  IV 
of  the  Revenue  Act  of  1918  is  a  complete  re-enact- 
ment of  the  law,  superseding  Title  II  of  the  Revenue 
Act  of  1916,  and  making  many  important  changes. 

§  3.  Scheme  of  the  present  statute. 

The  tax  is  imposed  "upon  the  transfer  of  the  net 
estate  of  every  decedent  dying  after  the  passage  of 

5.  In  what  follows  the  reference,  unless  otherwise  specified, 
is  to  the  present  statute  (Title  IV  of  the  Revenue  Act  of  1918). 
References  to  the  Regulations  are,  unless  otherwise  specified, 
to  the  present  Estate  Tax  Regulations  (Regulations  37,  Revised 
January,  1921).  Frequent  reference  is  also  made  to  the  revi- 
sion of  August,  1919.  For  convenience,  a  table  is  appended, 
giving  the  comparative  sections  of  the  various  statutes  contain- 
ing the  present  Estate  Tax  Law. 


FEDERAL  ESTATE  TAX. 


Not  a  property  tax. 


this  Act."  (Sec.  401.) 6  In  computing  the  tax  the 
value  of  the  "gross  estate"  is  first  determined.  This 
"gross  estate"  consists  of  certain  carefully  enumer- 
ated property  rights,  not  necessarily  vested  in  the 
decedent  at  the  time  of  his  death.  (Sec.  402.)  From 
the  value  of  this  gross  estate,  determined  as  of  the 
date  of  the  decedent's  death,  certain  deductions  are 
made;  and  the  balance  represents  the  value  of  the 
"net  estate"  (Sec.  403),  certain  percentages  of 
which  constitute  the  tax.  (Sec.  401.)  The  tax  is 
graduated,  running  from  one  per  cent  of  the  first 
fifty  thousand  dollars  of  the  net  estate  to  twenty- 
five  per  cent  of  the  amount  in  excess  of  ten  million 
dollars.     (Sec.  401.) 

§  4.  Not  a  property  tax. 

The  tax  is  imposed,  not  upon  the  property  con- 
stituting the  estate,  but  upon  its  "transfer."7  It  is 
not  a  direct  tax,  and  is  consequently  valid  although 

6.  The  Bureau  has  ruled  that  the  statute  went  into  operation 
at  6:55  P.  M.  on  February  24,  1919,  the  hour  of  its  approval. 
The  word  "passage"  in  Section  401  is  thus  construed  as  re- 
ferring to  the  time  when  the  Act  became  a  law  through  ap- 
proval, rather  than  the  time  when  it  went  into  actual  opera- 
tion, which,  in  general,  was  on  February  25,  1919  (Sec.  1409). 
The  result  of  this  ruling  is,  that  the  estates  of  decedents  dying 
after  6:55  P.  M.  on  February  24,  1919,  are  governed  by  the 
Revenue  Act  of  1918;  but  that,  if  the  decedent  died  before 
this  hour,  the  case  is  governed  by  the  earlier  statutes. 

7.  The  Regulations  provide:  "The  Federal  estate  tax  is 
imposed  upon  the  transfer  of  the  net  estate,  determined  in  the 
manner  prescribed,  of  every  person  dying  after  September  8, 


INTRODUCTORY. 


Not   a   legacy   tax. 


not  apportioned  among  the  various  States  accord- 
ing to  population,  as  required  by  the  Federal  Con- 
stitution in  the  case  of  direct  taxes.  (Art.  1,  Sec.  9, 
cl.  4.)8 

§  5.  Not  a  legacy  tax. 

The  tax  is  imposed  upon  the  transfer  of  the  entire 
net  estate;  must  be  paid  by  the  executor,  as  directed; 
and  is  not  to  be  apportioned  among  the  various  bene- 
ficiaries, in  accordance  with  their  respective  inter- 
ests.9    The  Regulations  provide: 

1916.  The  tax  is  not  laid  upon  the  property,  but  upon  its 
transfer  from  the  decedent  to  others."     (Art.  1.) 

8.  New  York  Trust  Co.  v.  Eisner,  263  Fed.  Rep.  620;  In  re 
Sherman's  Estate,  179  App.  Div.  497,  166  N.  Y.  Supp.  19, 
aff'd,  222  N.  Y.  540.  See  also  In  re  Hamlin,  226  N.  Y.  407,  420; 
124  N.  E.  Rep.  1.  These  cases  construe  the  earlier  Act  (Title  II 
of  the  Revenue  Act  of  1916) ;  but  the  same  decision  would 
necessarily  be  made  under  the  similar  provisions  of  the  pres- 
ent statute. 

It  has  been  contended  that  the  present  tax,  in  spite  of  the 
language,  is  a  direct  tax,  since  it  affects  the  estate  as  a  whole, 
and  is  paid  by  the  executor.  This  contention,  however,  has  so 
far  met  with  no  success  in  the  courts. 

9.  In  re  Hamlin,  226  N.  Y.  407,  124  N.  E.  Rep.  4;  Plunkett 
v.  Old  Colony  Trust  Co.,  233  Mass.  471;  124  N.  E.  Rep.  265. 
The  Hamlin  case  may  be  taken  as  overruling  In  re  Douglass's 
Estate  (104  Misc.  359;  171  N.  Y.  Supp.  956),  although  it  is 
not  cited.  Apparently  in  conflict  with  the  Hamlin  and  Plun- 
kett cases,  see  Fuller  v.  Gale  (103  Atl.  Rep.  [N.  H.]  308), 
holding  that  the  tax  should  be  apportioned  among  the  various 
beneficiaries.  The  case  is  not  clearly  reasoned.  The  reason- 
ing of  the  other  cases  is  exhaustive  and  satisfactory,  contain- 


FEDERAL  ESTATE  TAX. 


Escheated  property — Nature  of  the  tax. 


' '  The  subject  of  tax  is  the  transfer  of  the  en- 
tire net  estate,  not  any  particular  legacy,  de- 
vise, or  distributive  share.  It  is  not  an  indivi- 
dual inheritance  tax.  The  value  of  the  separate 
interests  and  the  relationship  of  the  beneficiary 
to  the  decedent  have  no  bearing  upon  the  ques- 
tion of  liability  or  the  extent  thereof." 
(Art.  1.) 

§  6.  Escheated  property. 

The  failure  of  the  statute  to  take  any  account  of 
the  individual  beneficiary  is  reflected  in  the  rule 
that — ' '  The  transfer  of  property  is  taxable,  although 
it  escheats  to  the  State  for  lack  of  heirs."  (Regula- 
tions, Art.  1.) 

§  7.  Nature  of  the  tax. 
The  Regulations  provide: 

1 '  The  statute  embraces  transfers  by  will  or  un- 
der the  intestate  laws,  and  also  transfers  made 
by  the  decedent  in  his  lifetime,  when  made  in 
contemplation  of  death  or  intended  to  take  effect 
in  possession  or  enjoyment  at  or  after  his  death. 
The  statute  also  enumerates  certain  special  cases 
not  strictly  of  either  character  just  described. 
The  practical  test  of  the  existence  of  a  taxable 
transfer  is  whether  the  statute  directs  that  the 
property  in  question  be  included  in  the  gross  es- 
tate."    (Art.  2.) 

ing  an  analysis  of  the  language  of  the  statute,  and  a  contrast 
of  it  with  the  earlier  legacy  tax  of  1898  (30  Stat.  448,  464). 


INTRODUCTORY. 


Estates  subject  to  tax — Definition  of  "resident." 

§  8.  Estates  subject  to  tax. 
The  Regulations  provide: 

"The  tax  is  imposed  in  the  case  of  the  estate 
of  'every  decedent,'  although,  by  reason  of  an 
exemption,  the  net  estate  of  a  resident  decedent, 
in  order  to  be  taxable,  must  exceed  $50,000. 
(See  Sec.  403  [a]  4.)  The  estate  of  a  non- 
resident decedent,  however,  is  taxable  if  any 
part  of  it  is  situated  in  the  United  States.  The 
statute  takes  no  account  of  the  citizenship  of 
the  decedent,  but  prescribes  different  rules  ac- 
cording to  whether  the  decedent  was  a  'resi- 
dent' or  a  'nonresident'  of  the  United  States. 
A  person  residing  in  Italy  is  a  'nonresident,' 
for  the  purpose  of  the  tax,  although  a  citizen  of 
the  United  States;  a  person  residing  in  the 
United  States  is  a  'resident,'  although  a  citizen 
of  Italy.  A  'resident'  is  one  who  at  the  time 
of  his  death  resided  in  the  States,  the  Terri- 
tories of  Alaska  or  Hawaii,  or  the  District  of 
Columbia.  All  other  persons  are  'nonresidents.' 
Persons  residing  in  Porto  Rico  or  the  Philip- 
pine Islands  are  'nonresidents.'  "     (Art.  4.) 

§  9.  Definition  of  "resident." 
The  Regulations  provide: 

"A  person  is  a  'resident'  of  the  United  States, 
for  the  purposes  of  this  tax,  only  in  case  he  had 
a  domicile  therein  at  the  time  of  his  death.10 

10.  This  is  the  ordinary,  probably  universal,  rule  in  the  case 


FEDERAL  ESTATE  TAX. 


Definition  of  "resident" — Specific  cases. 

A  person  acquires  a  domicile  in  a  place  by 
living  there,  for  even  a  brief  period  of  time, 
with  no  definite  present  intention  of  later  re- 
moving therefrom.11  Residence  without  the 
requisite  intention  to  remain  will  not  suffice  to 
constitute  domicile,  nor  will  intention  to 
change  domicile  effect  such  a  change  unless 
accompanied  by  actual  removal.  A  decedent 
who  died  while  abroad  will  be  presumed  to  be 
a  nonresident,  and  the  burden  of  proving  the 
contrary  rests  upon  the  executor."     (Art.  5.) 

§  10.  Same — Specific  cases. 

In  the  following  cases  it  has  been  ruled  that  the 
decedent  had  not  changed  his  domicile  from  this 
country  to  another,  and  was  consequently  a  "resi- 
dent" at  the  time  of  his  death:  An  ambassador 
serving  abroad  at  the  time  of  his  death;  a  person 
temporarily  abroad  on  business  and  intending  to 
return  when  it  is  finished;  and  a  person  going  to 
another  country  for  his  health,  and  intending  to 
return  when  able.  Conversely,  a  foreign  diplomat 
who  dies  in  this  country  while  on  a  diplomatic 
mission  doe's  not  acquire  a  domicile  here,  and  is  a 
nonresident.      On    the    other    hand,    a    missionary 

of   Inheritance    Taxes.      See    Gleason    &    Otis    on    Inheritance 
Taxation,  2d  Ed.,  p.  213. 

11.  The  test  of  a  change  of  domicile  is  "the  absence  of  any 
present  intention  of  not  residing  permanently  or  indefinitely 
in  the  new  abode."    Williams  v.  Osenton,  232  U.  S.  619,  624. 


INTRODUCTORY. 


Military  exemption. 


going  to  China  and  intending  to  stay  there  the  rest 
of  her  working  life,  returning  only  in  case  of  dis- 
ability, and  actually  dying  while  in  such  service,  is 
held  to  have  effected  a  change  of  domicile,  and  con- 
sequently to  be  a  nonresident. 

§  11.  Military  exemption. 
The  statute  provides: 

"The  taxes  imposed  by  this  title  or  by  Title 
II  of  the  Revenue  Act  of  1916  (as  amended  by 
the  Act  entitled  'An  Act  to  provide  increased 
revenue  to  defray  the  expenses  of  the  increased 
appropriations  for  the  Army  and  Navy  and  the 
extensions  of  fortifications,  and  for  other  pur- 
poses,' approved  March  3,  1917)  or  by  Title  IX 
of  the  Revenue  Act  of  1917,  shall  not  apply  to 
the  transfer  of  the  net  estate  of  any  decedent 
who  has  died  or  may  die  while  serving  in  the 
military  or  naval  forces  of  the  United  States 
in  the  present  war  or  from  injuries  received  or 
disease  contracted  while  in  such  service,  and 
any  such  tax  recollected  upon  such  transfer 
shall  be  refunded  to  the  executor."    (Sec.  401.) 

The  Regulations  provide: 

"The  estates  of  persons  dying  while  actually 
serving  in  the  military  or  naval  forces  of  the 
United  States  in  the  present  war  with  Germany 
are  exempt  from  tax.  The  date  of  the  termina- 
tion of  the  war,  for  the  purpose  of  this  tax,  is 
that  fixed  by  proclamation  of  the  President. 


10  FEDERAL  ESTATE  TAX. 

Scope  of  exemption — Red  Cross  worker — Rates  of  tax. 

An  estate  is  also  exempt  if  a  person  so  serving- 
dies  after  leaving  the  service,  provided  his 
death  is  directly  traceable  to  injuries  received, 
or  disease  contracted,  while  in  such  service. 
The  term  *  military  or  naval  forces  of  the  United 
States'  includes,  among  other  units,  the  Marine 
Corps,  the  Coast  Guard,  the  Army  Nurse  Corps, 
Female,  and  the  Navy  Nurse  Corps,  Female. 
This  exemption  applies  to  any  estate  tax  im- 
posed, whether  by  the  Revenue  Act  of  1916  or 
subsequent  statutes.  If  the  tax  has  been  col- 
lected, the  executor  should  make  claim  for 
refund."    (Art.  9.) 

§  12.  Scope  of  exemption — Red  Cross  worker. 

The  exemption  provision  is  held  to  embrace  only 
the  actual  military  and  naval  forces  of  the  United 
States,  supported  by  the  revenues  of  the  Govern- 
ment. It  is  held  not  to  embrace  the  members  of 
affiliated  war  organizations,  such  as  the  Red  Cross; 
and  the  estate  of  a  Red  Cross  worker  is  consequently 
held  to  be  subject  to  the  tax.12 

§  13.  Rates  of  tax. 
The  statute  provides: 

"That  (in  lieu  of  the  tax  imposed  by  Title  II 
of  the  Revenue  Act  of  1916,  as  amended,  and  in 
lieu  of  the  tax  imposed  by  Title  IX   of  the 

12.  This  ruling  would  doubtless  include  members  of  the 
Y.  M.  C.  A.,  the  Salvation  Army,  the  Knights  of  Columbus,  etc. 


INTRODUCTORY.  11 


Rates  of  tax. 


Revenue  Act  of  1917)  a  tax  equal  to  the  sum  of 
the  following  percentages  of  the  value  of  the 
net  estate  (determined  as  provided  in  section 
403)  is  hereby  imposed  upon  the  transfer  of  the 
net  estate  of  every  decedent  dying  after  the 
passage  of  this  Act,  whether  a  resident  or  non- 
resident of  the  United  States: 

1  per  centum  of  the  amount  of  the  net  estate 
not  in  excess  of  $50,000; 

2  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $50,000  and  does  not  exceed 
$150,000; 

3  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $150,000  and  does  not  exceed 
$250,000; 

4  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $250,000  and  does  not  exceed 
$450,000; 

6  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $450,000  and  does  not  exceed 
$750,000; 

8  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $750,000  and  does  not  exceed 
$1,000,000; 

1 0  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $1,000,000  and  does  not  exceed 
$1,500,000; 

12  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $1,500,000  and  does  not  exceed 
$2,000,000; 


12  FEDERAL  ESTATE  TAX. 

Computation  of  tax. 

14  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $2,000,000  and  does  not  exceed 
$3,000,000; 

16  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $3,000,000  and  does  not  exceed 
$4,000,000; 

18  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $4,000,000  and  does  not  exceed 
$5,000,000; 

20  per  centum  of  the  amount  by  which  the 
net  estate  exceeds  $5,000,000;  and  does  not  ex- 
ceed $8,000,000; 

22  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $8,000,000  and  does  not  exceed 
$10,000,000;  and 

25  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $10,000,000."     (Sec.  401.) 

§  14.  Computation  of  tax. 

The  Regulations  provide: 

"The  first  step  in  the  determination  of  tax 
liability  is  to  ascertain  the  value  of  the  dece- 
dent's gross  estate  in  the  manner  prescribed  by 
law.  (See  Arts.  12  to  36.)  The  second  step  is 
to  deduct  from  this  value  certain  amounts 
specified  by  law  in  order  to  arrive  at  the  value 
of  the  net  estate.  (See  Arts.  37  to  64.)  The 
third  step  is  to  obtain  the  sum  of  certain  per- 
centages of  the  value  of  successive  portions  of 
the  net  estate,  as  provided  by  the  applicable 
taxing  act.     (See  Arts.  7,  8.)"     (Art.  6.) 


INTRODUCTORY. 


13 


Computation  of  tax. 


"The  amount  of  tax  is  obtained  by  finding 
the  sum  of  certain  percentages  of  the  value  of 
the  net  estate  according  to  the  provisions  of 
the  applicable  taxing  act. 

"There  are  four  rates  of  tax  imposed,  respec- 
tively, by  the  Revenue  Act  of  1916,  the  amend- 
ment thereto  of  March  3,  1917,  the  Revenue  Act 
of  1917,  and  the  Revenue  Act  of  1918.  In  the 
case  of  each  act  the  rates  contained  therein  are 
applicable  to  the  estates  of  decedents  who  died 
on  or  after  the  effective  date  of  the  act  and 
prior  to  the  effective  date  of  the  next  succeed- 
ing act.  A  table  of  the  four  sets  of  rates  is 
given  below: 

Bates  of  Estate  Tax. 


1 

2 

3 

4 

Blocks  of  net  estate. 

Amend- 

Act of 

ment  of 

Act  of 

Act  of 

1916 

Mar.  3, 

1917 

1918 

(effective 

1917 

(effective 

(effective 

Sept.  9, 

(effective 

Oct.  4, 

Feb.  25, 

Exceeding 

Not  exceed- 
ing 

Amount  of 
block. 

1910). 

Mar.  3, 
1917). 

1917). 

1919). 

Per  cent. 

Per  cent. 

Per  cent. 

Per  cent. 

$50,000 
150,000 

$50,000 
100,000 

1 
2 

n 

3 

2 
4 

1 

$50,000 

2 

150,000 

250,000 

100,000 

3 

4J 

6 

3 

250,000 

450,000 

200,000 

4 

6 

8 

4 

450,000 

750,000 

300,000 

5 

7} 

10 

6 

750,000 

1,000,000 

250,000 

5 

7J 

10 

8 

1,000,000 

1,500,000 

500,000 

6 

9 

12 

10 

1 , 500 , 000 

2,000,000 

500,000 

6 

9 

12 

12 

2,000,000 

3,000,000 

1,000,000 

7 

10} 

14 

14 

3,000,000 

4,000,000 

1,000,000 

8 

12 

16 

16 

4,000,000 

5,000,000 

1,000,000 

9 

13J 

18 

18 

5,000,000 

6,000,000 

1 ,000,000 

10 

15 

20 

20 

0,000,000 

7,000,000 

1,000,000 

10 

15 

20 

20 

7,000,000 

8,000,000 

1 ,000,000 

10 

15 

20 

20 

8,000,000 

9,000,000 

1  ,000,001) 

10 

15 

22 

22 

9,000,000 

10,000,000 

1,000,000 

10 

15 

22 

22 

10,000,000 

10 

15 

25 

25 

14  FEDERAL  ESTATE  TAX. 

Table  for  computation. 

"The  rates  given  by  the  different  acts,  as  set 
forth  above,  apply  to  the  estates  of  decedents 
dying  within  the  following  dates: 

Column  1,  Revenue  Act  of  1916,  effective  Sept. 
9,  1916,  to  Mar.  2,  1917,  inclusive. 

Column  2,  amendment  of  Mar.  3, 1917,  effective 
Mar.  3,  1917,  to  Oct.  3,  1917,  inclusive. 

Column  3,  Revenue  Act  of  1917,  effective  Oct. 
4,  1917,  to  Feb.  24,  1919,  inclusive. 

Column  4,  Revenue  Act  of  1918,  effective  on 
and  after  Feb.  25,  1919."     (Art.  7.) 

§  15.  Same — Table  for  computation. 

The  Regulations  provide: 

"For  the  purpose  of  computing  the  tax,  the 
net  estate  is  divisible  into  blocks,  each  block 
being  taxed  at  a  different  and  increasing  rate. 
The  preceding  table  gives  the  amount  of  the 
various  blocks  and  the  applicable  rate  of  tax 
under  each  of  the  taxing  acts.  For  example, 
the  tax  upon  the  net  estate  of  $1,240,000  of  a 
decedent  dying  on  or  after  February  25,  1919, 
would  be  computed  as  follows: 

Amount   of   first    block..  $50,000  at  1  per  cent  $500 

Amount  of  second  block.  100,000  at  2  per  cent  2,000 

Amount  of  third  block..  100,000  at  3  per  cent  3,000 

Amount  of  fourth  block.  200,000  at  4  per  cent  8,000 

Amount  of  fifth  block..  300,000  at  6  per  cent  18,000 

Amount   of   sixth   block.  250,000  at  8  per  cent  20,000 

Remainder 240,000  at  10  per  cent  24,000 


Total  net  estate $1,240,000     Total  tax...    $75,500 


INTRODUCTORY.  15 


Table  for  computation. 


''There  is  subjoined  a  table  for  ascertaining 
the  tax  without  the  detailed  computation  given 
above.  An  illustration  of  its  use  is  as  follows: 
The  net  estate  of  a  decedent  dying  on  or  after 
February  25,  1919,  amounts  to  $1,240,000.  By 
reference  to  the  table  it  will  be  seen  that  the 
last  complete  block  prior  to  this  amount  is 
$1,000,000,  and  that  the  total  tax  on  a  million 
dollars  under  the  rates  in  force  amounts  to 
$51,500.  Upon  the  remainder  of  the  estate, 
$240,000,  the  tax  is  computed  at  the  rate  con- 
tained in  the  following  line,  or  at  10  per  cent. 
The  tax  on  this  amount  is  consequently  $24,000. 
The  following  result  is  thus  obtained: 

Total    tax    on $1,000,000       $51,500 

Tax  on 240,000         24,000 

Total $1,240,000       $75,500" 

(Art.  8.) 

The  table  referred  to  is  the  following: 


16 


FEDERAL  ESTATE  TAX. 


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3 

CHAPTER  II. 

GROSS  ESTATE. 

§  16.  The  statute. 
The  statute  provides: 

"That  the  value  of  the  gross  estate  of  the 

decedent  shall  be  determined  by  including  the 

value  at  the  time  of  his  death  of  all  property, 

real     or     personal,     tangible     or     intangible, 

wherever  situated."    (Sec.  402.) 

There  follow  six  subdivisions,  each  specifying  a 

class  of  property  the  value  of  which  is  to  be  included 

in  the  gross  estate.1 

(a)    PROBATABLE  ASSETS. 

§  17.  The  statute. 

Subdivision  (a)  of  Section  402  of  the  statute  pro- 
vides for  the  inclusion  of  property: 

"To  the  extent  of  the  interest  therein  of  the 
decedent  at  the  time  of  his  death  which  after 
his  death  is  subject  to  the  payment  of  the 
charges  against  his  estate  and  the  expenses  of 
its  administration  and  is  subject  to  distribution 
as  part  of  his  estate." 

As  to  this  subdivision  the  Regulations  provide: 
"This  provision  is   designed  to  include  all 
property   interests   of  the   decedent,   of  what- 

1.  Sec.  402,  pars,  (a),  (b),  (c),  (d),  (e),  (f). 
2  [17] 


18  FEDERAL  ESTATE  TAX. 

Real  property — Cemetery  lots — Personal  property. 

ever  character.     It  is  the  commonest  form  of 

taxable  transfer."  (Art.  12.) 

Certain  interest  have  received  special  considera- 
tion. 

§  18.  Real  property. 

The  Regulations  provide: 

' '  Real  property  owned  by  the  decedent,  when 
situated  in  the  United  States,  should  be  in- 
cluded in  the  gross  estate,  whether  the  dece- 
dent was  a  resident  or  a  nonresident,  and 
whether  the  property  came  into  the  possession 
and  control  of  the  executor  or  administrator  or 
passed  directly  to  heirs  or  devisees.  Real 
property  not  situated  in  the  United  States 
should  not  be  included,  whether  the  decedent 
was  a  resident  or  nonresident."     (Art.  13.) 

§  19.  Cemetery  lots. 

The  Regulations  provide: 

"A  cemetery  lot  owned  by  the  decedent  is 
part  of  his  gross  estate,  but  its  value  is  limited 
to  the  salable  value  of  such  part  of  it  as  is  not 
designed  for  the  interment  of  the  decedent  or 
members  of  his  family."     (Art.  13.) 

§  20.  Personal  property. 
The  Regulations  provide: 

1  'Where  the  decedent  was  a  resident,  all 
personal  property  owned  by  him  should  be  in- 


GROSS  ESTATE.  19 


Notes   and   bonds — Bond   interest — Rent. 


eluded,  wherever  situated.  Where  decedent 
was  a  nonresident,  so  much  of  his  personal 
property  as  was  actually  situated  in  the  United 
States  at  the  time  of  his  death  should  be  in- 
cluded."    (Art.  13.) 

§  21.  Notes  and  bonds. 
The  Regulations  provide: 

''The  value  of  notes  or  other  claims  held 
by  the  decedent  should  be  included,  though 
they  are  canceled  by  his  will  or  appear  to 
be  barred  by  the  statute  of  limitations. 
All  bonds,  whether  federal,  state,  or  municipal, 
and  whether  or  not  containing  a  tax-free 
covenant,  should  not  be  included."     (Art.  13.) 

§  22.  Bond  interest. 

The  Regulations  provide: 

"The  amount  of  interest  accrued  upon  bonds 
on  the  day  of  death,  whether  payable  then  or 
subsequently,  should  be  included.  All  matured 
coupons,  whether  presented  for  payment  or 
not,  should  be  included."     (Art,  13.) 

§  23.  Rent. 

The  Regulations  provide: 

"Rent  which  had  accrued  upon  real  property 
at  the  time  of  the  decedent's  death,  whether 
then  payable  or  not,  is  included  in  the  gross 
estate."     (Art.  13.) 
L 


20  FEDERAL  ESTATE  TAX. 

Dividends. 

§  24.  Dividends. 

The  Regulations  provide: 

"Dividends,  whether  upon  preferred  or 
common  stock,  should  not  be  included  unless 
actually  declared  prior  to  the  date  of  death. 
The  amount  of  dividends  upon  stock  which 
have  been  declared,  but  not  paid,  must  be  re- 
turned where  the  value  of  the  stock  at  the  time 
of  the  decedent 's  death  does  not  reflect  the  divi- 
dends; that  is,  where  the  death  occurs  after  the 
closing  of  the  books  of  the  corporation  and  the 
stock  consequently  sells  'ex  dividend.'  Where 
the  death  occurs  before  the  closing  of  the 
books,  the  value  of  the  stock  reflects  the  divi- 
dend, and  it  should  not  be  included. 

' '  Example :  A  5  per  cent  dividend  upon  stock 
is  declared  March  1,  payable  on  April  1  to 
stockholders  of  record  on  March  15.  If  the 
death  occurred  on  March  10  and  the  market 
price  on  that  day  was  90,  the  value  to  be  re- 
turned for  both  stock  and  dividend  is  90,  the 
dividend  being  reflected  in  the  quoted  price. 
If  the  death  occurred  on  March  20,  the  books 
have  been  closed  and  the  dividend  is  not  re- 
flected in  the  selling  price.  Under  these  cir- 
cumstances the  dividend  must  be  returned  in 
addition  to  the  quoted  price  of  the  stock;  and 
the  proper  return  would  be  stock  90,  dividend 
$5."    (Art.  13.) 


GROSS  ESTATE.  21 


Contingent  interests. 


§  25.  Contingent  interests. 

The  statute  provides  for  the  inclusion  "of  all 
property,  real  or  personal,  tangible  or  intangible, 
wherever  situated."  (Sec.  402.)  It  has  often  been 
held  that  the  word  "property"  is,  unless  qualified, 
nomen  generalissimum,  inclusive  of  any  interest 
whatsoever.2  The  context  here  indicates  the  intent 
to  give  the  term  an  unrestricted  meaning;  and  it  is 
so  construed  by  the  Bureau.  The  result  is  to  hold 
that  all  interests  of  the  decedent,  whether  vested 
or  contingent  at  the  time  of  his  death,  are  a  proper 
subject  for  inclusion  in  the  gross  estate.3  It  is 
consequently  unnecessary  to  determine  whether  the 
particular  interest  in  question  is  properly  to  be 
styled  contingent,  or  rather  as  a  vested  interest 
subject,  however,  to  be  defeated  in  a  subsequent 
contingency. 

This  rule,  however,  does  not  warrant  the  inclusion 
of  a  contingent  interest  where  the  contingency 
determining  the  interest  is  the  decedent's  own 
death.  In  such  a  case  the  death  defeats  the  interest, 
and  it  forms  no  part  of  the  gross  estate.4     . 

2.  It  has  been  said  that  "Property  is  everything  which  has 
an  exchangeable  value"  (Slaughter-House  Cases,  16  "Wall. 
36,  127);  that  "By  the  term  property  •  •  •  all  titles  are 
embraced,  legal  or  equitable,  perfect  or  imperfect."  Hornsby 
v.  United  States,  10  Wall.  224,  242. 

3.  For  the  manner  of  valuing  such  interests,  see  p.  114. 

4.  See  Regulations,  Art.  12. 


22  FEDERAL  ESTATE  TAX. 

Remainders — Life  estate — Legal  title. 

§  26.  Remainders. 

The  Regulations  provide: 

"The  value  of  a  vested  remainder  should  be 
included  in  the  gross  estate.  Nothing  should 
be  included,  however,  on  account  of  a  con- 
tingent remainder  where  the  contingency  does 
not  happen  in  the  lifetime  of  the  decedent,  and 
the  interest  consequently  lapses  at  his  death." 
(Art.  12.) 

§  27.  Life  Estate — Annuities. 

The  Regulations  provide: 

"Nor  should  anything  be  included  on  account 
of  a  life  estate  in  the  decedent.    There  should 
be  included,  however,  the  value  of  an  annuity 
payable  to  the  decedent  upon  the  life  of  a  third 
person  who  survives  him,  and  the  value  of  an 
estate  for  the  life  of  a  person  other  than  the 
decedent."     (Art.  12.) 
An  estate  for  the  life  of  a  person  terminates  at 
his  death,  and  cannot,  of  course,  be  a  subject  for 
inclusion  in  his  gross  estate.    This  is  not  true,  how- 
ever, where  the  estate  is  for  the  life  of  another. 
Such  an  interest  whether  in  the  form  of  an  annuity 
or  otherwise,  is  an  asset  of  the  estate,  the  value  of 
which,  at  the  time  of  the  death,  is  included  in  the 
gross  estate. 

§  28.  Legal  title  without  beneficial  interest. 

The  Regulations  provide: 

"As  a  basis  for  tax,  there  must  be  an  actual, 


GROSS  ESTATE.  23 


Legal  title  without  beneficial  interest. 


beneficial  ownership  in  the  decedent,  not  a  bare 
legal  title,  or  one  held  in  trust.    Thus,  property 
actually  devoted  to  religious  or  charitable  pur- 
poses, and  placed  in  the  name  of  an  individual 
solely  for  convenience  in  administration,  is  not 
included  in  his  gross  estate."     (Art.  12.) 
Ananlogous   cases,  not  specified  in  the  Regula- 
tions, have  come  before  the  Bureau,  and  received 
similar  treatment.    Thus,  it  has  been  held  that  the 
entire  value  of  land  standing  in  the  name  of  the 
decedent  would  not  be  included  in  the  gross  estate 
where  it  appeared  that  he  made  a  verbal  deed  of 
an  interest  therein,  and  the  land  was  held  by  the 
decedent  in  common  with  the   purchasers  of  the 
interest,  all  of  them  contributing  to  pay  the  taxes, 
joining  in  the  execution  of  leases  and  receiving 
each  his  share  of  moneys  derived  from  the  land.    In 
this  case  there  was  included  in  the  decedent's  gross 
estate  only  the  value  of  the  actual  beneficial  interest 
which  he   retained.     Similarly,   it  has   been  ruled 
that  where  the  decedent  agrees  to  transfer  land  in 
consideration  of  a  substantial  sum,  and  executes  a 
deed  in  pursuance  of  the  contract,  and  the  grantees 
enter  into  immediate  possession,  and  pay  the  full 
purchase  price,  the  land  should  not  be  included  in 
the  decedent's  gross  estate,  although  the  contract 
provides  that  the  deed  be  placed  in  escrow,  and 
delivered  to  the  grantees  only  upon  the  death  of  the 
decedent  and  his  wife. 


24  FEDERAL  ESTATE  TAX. 

Right  of  action  for  causing  death — Payments  to  children. 

§  29.  Right  of  action  for  causing  death. 
The  Regulations  provide: 

"The  statute  also  includes  only  property- 
rights  existing  in  the  decedent  in  his  lifetime 
and  passing  to  his  estate.5  It  consequently 
does  not  include  a  right  which  came  into  exist- 
ence only  after  the  decedent's  death,  such  as  a 
cause  of  action  by  statute  for  causing  the  death. 
The  proceeds  of  such  a  cause  of  action  should 
not  be  included  in  the  gross  estate,  whether 
payable  generally  to  the  estate  or  to  some 
specified  class  of  persons,  such  as  the  widow 
or  children."    (Art.  12.) 

§  30.  Payments  to  children  of  the  decedent. 

Loans  to  children  of  the  decedent,  as  well  as  to 
other  persons,  are,  of  course,  a  proper  subject  for 
inclusion  in  the  gross  estate,  since  they  constitute 
a  debt  due  to  the  decedent.  It  is  not  always  clear, 
however,  whether  the  transaction  in  question  con- 
stitutes a  loan  or  an  advancement — whether  the 
paper  executed  was  merely  a  memorandum  of  an 
advancement,6  or  was  intended  to  evidence  a  bind- 
ing obligation  of  the  person  receiving  the  money. 
It  has  been  ruled  that  where  the  decedent  takes 

5.  The  reference  is  here  confined  to  subdivision  (a)  of 
Section  402.  Several  of  the  following  subdivisions  specify 
interests  which  do  not  answer  this  description. 

6.  As  to  whether  an  advancement  is  a  transfer  in  con- 
templation of  death,  see  p.  48. 


GROSS  ESTATE.  25 


Dower  and  courtesy. 


notes  or  bonds  for  the  amounts  paid,  upon  which 
payments  are  made  in  some  cases,  the  transaction 
will  be  deemed  to  be  what  it  purports  to  be,  and 
the  value  of  these  obligations  included  in  the  gross 
estate,  even  though  the  decedent  in  his  will  directs 
that  the  amounts  be  deducted  from  the  respective 
shares  of  the  persons  receiving  the  money.  Such  a 
direction,  however,  doubtless  is  to  some  extent  in- 
dicative of  an  advancement;  and  where  in  such  a 
case  there  is  no  evidence  of  indebtedness,  but 
merely  a  record  of  the  amounts,  kept  by  the  dece- 
dent, the  transactions  will  be  treated  as  advance- 
ments, and  nothing  included  in  the  gross  estate  by 
reason  thereof.  And  even  the  taking  of  notes  will 
not  result  in  treating  the  transaction  as  a  loan 
where  nothing  was  ever  collected,  and  other  circum- 
stances show  plainly  that  the  payments  were  in- 
tended as  advancements. 

(b)    DOWER  AND  COURTESY 

§  31.  The  statute. 

Subdivision    (b)    of   Section  402   of  the   statute 
reads: 

"To  the  extent  of  any  interest  therein  of  the 
surviving  spouse,  existing  at  the  time  of  the 
decedent's  death  as  dower,  courtesy,  or  by 
virtue  of  a  statute  creating  an  estate  in  lieu  of 
dower  or  courtesy." 
Under  this  express  provision  there  can  be  no 
doubt  of  the  inclusion  in  the  gross  estate  of  the 


26  FEDERAL  ESTATE  TAX. 

Estates  in  lieu  of  dower  and  courtesy. 

value  of  dower  and  courtesy  interests  where  the 
decedent  died  after  February  24,  1919,  when  the 
Revenue  Act  of  1918  went  into  operation.  That  is, 
the  full  value  of  the  land  should  be  included  in  such 
cases,  without  diminution  by  reason  of  these  out- 
standing interests. 

§  32.  Estates  in  lieu  of  dower  and  courtesy. 

The  question  what  is  a  statutory  "  estate  in  lieu 
of  dower  or  courtesy"  has  received  but  little  con- 
sideration. The  term  would  doubtless  include  any 
interest  expressly  declared  by  statute  to  be  in  lieu 
of  dower  or  courtesy;  also,  it  would  seem,  any  in- 
terest of  the  same  general  character,  though  differ- 
ing in  some  particular. 

In  In  re  Strahan's  Estate7  the  court  had  under 
consideration  a  statute  which  abolished  dower  and 
courtesy,  and  gave  to  the  wife  a  distributive  share 
of  one-fourth  of  the  real  and  personal  property  of 
the  husband.  The  court  said  that  this  share  "is 
given  to  her  in  lieu  of  dower, ' '  that  her  interest  was 
"an  enlarged  estate  of  the  same  kind  as  that  of 
dower  or  courtesy. ' '  It  was  accordingly  held,  under 
the  statute  then  under  consideration,  that  the 
interest  was  not  taxable,  dower  and  courtesy  in- 
terests not  being  included  therein.  The  converse 
would,  of  course,  be  true  under  the  present  statute, 
which  expressly  taxes  such  interests. 

It  was  probably  unnecessary  in  the  Strahan  case 

7.  93  Neb.  828;  142  N.  W.  Rep.  678. 


GROSS  ESTATE.  27 


Estates  in  lieu  of  dower  and  courtesy. 


to  determine  whether  the  estate  in  question  was  one 
"in  lieu  of  dower."  The  main  ground  of  decision 
was,  that  the  interest  conferred  upon  the  wife  was 
an  absolute  one,  of  which  the  husband  could  not 
deprive  her;  that  it  did  not  pass  from  him  to  her 
at  his  death;  and  consequently  that  it  was  not 
embraced  in  a  statute  taxing  interests  passing  from 
the  decedent.8  And  this  was  the  sole  ground 
assigned  in  a  Utah  case  for  a  similar  ruling  as  to 
the  taxability  of  a  one-third  interest  of  the  wife  in 
all  estates,  whether  legal  or  equitable,  in  either  real 
or  personal  property,  possessed  by  the  husband  at 
any  time  during  the  marriage.9 

The  Strahan  case,  however,  contains  an  explicit 
dictum  that  estates  of  the  kind  under  consideration 
are  "in  lieu  of  dower."  This  is  probably  a  correct 
interpretation  for  purposes  of  the  Federal  Estate 
Tax,  since  otherwise  we  should  have  the  peculiar 
result  that  dower  proper  is  taxable,  but  that  an 
absolute  interest  of  a  similar  kind  is  not.  The  rule 
is  consequently  stated  to  be,  that  an  absolute  dis- 
tributive share  in  the  husband's  property,  conferred 
upon  the  wife  by  a  statute  which  abolishes  dower, 
is  taxable  under  Title  IV  of  the  Revenue  Act  of 
1918. 

It  is  believed  that  the  term  "estate  in  lieu  of 
dower  or  courtesy"  would  not  include  community 
property,   the  interests  in  which  are  different  in 

8.  See  93  Neb.,  pp.  831-3. 

9.  In  re  Bullen  'a  Estate,  47  Utah  90,  151  Pac.  Rep.  533. 


28  FEDERAL  ESTATE  TAX. 

Status  of  dower  and  courtesy  under  the  Act  of  1916. 

character,  and  have  their  origin  in  a  system  un- 
known to  the  common  law,  and  fundamentally  dif- 
ferent in  its  concepts. 

§  33.  Status  of  dower  and  courtesy  under  the  Act 
of  1916. 

The  Regulations  provide: 

"The  effect  of  this  provision10  is  to  require 
the  inclusion  of  the  full  value  of  the  land,  with- 
out deduction  of  the  value  of  the  interest  of  a 
surviving  husband  or  wife.     This  rule  applies 
to  the  estate  of  any  decedent  dying  after  Sep- 
tember 8,  1916."     (Art.  21.) 
The  rule  of  inclusion  is  thus  applied  to  estates 
governed  by  the  Revenue  Act  of  1916.     The  right 
to  do  this  is  at  least  doubtful.    The  earlier  statute 
does  not  specifically  mention  such  interests.    If  in- 
cluded at  all,  it  seems  that  they  must  come  under 
the  general  provision  relating  to  property  of  the 
decedent  which  after  his  death  "is  subject  to  the 
payment  of  the  charges  against  his  estate  and  the 
expenses   of  its  administration   and   is   subject   to 
distribution  as  part  of  his  estate."11     How  the  in- 
terest in  question  is  embraced  in  this  language  is  by 
no  means  clear. 

The  Bureau  has,  however,  asserted  throughout 
the  right  to  tax  such  interests.  The  original  Estate 
Tax  Regulations  state:     "There  is  no  provision  of 

10.  The  reference  is  to  subdivision  (b)  of  Sec.  402. 

11.  Revenue  Act  of  1916,  Sec.  202  (a). 


GROSS  ESTATE.  29 


Status  of  dower  and  courtesy  under  the  Act  of  1916. 

the  taxing  act  under  which  the  value  of  widow's 
dower  or  husband's  courtesy,  or  any  similar  in- 
terest of  a  successor  to  decedent  by  whatever  name 
designated  in  the  local  law,  can  be  excluded  or 
deducted  from  the  gross  estate."12  The  natural 
inquiry,  however,  appears  to  be  whether  the  statute 
contains  any  affirmative  provision  for  inclusion.  If 
not,  the  absence  of  a  deduction  provision  seems  im- 
material.13 

The  only  decision  so  far  on  this  point  is  adverse 
to  the  Government,  the  decision  being  that  the  dower 
interest  of  the  wife  under  the  Laws  of  Tennessee 
should  not  be  included  in  the  gross  estate  of  the 
deceased  husband.14 

12.  Regulations  No.  37,  Revised  May,  1917,  Art.  VII. 

13.  The  Supreme  Court  of  Nebraska  has  used  the  following: 
language  as  to  an  interest  given  to  the  widow  by  a  statute 
abolishing  dower:  "Strictly  speaking,  the  widow's  share 
should  be  considered  as  immune,  rather  than  exempt,  from 
an  inheritance  tax.  It  is  free,  rather  than  freed,  from  such 
tax.  It  is  not  excepted  from  the  taxable  class  because  it 
never  was  in  such  class."  In  re  Strahan's  Estate,  93  Neb. 
828;  142  N.  W.  Rep.  678. 

14.  Randolph  v.  Craig,  267  Fed.  Rep.  993,  Dist.  Ct,  M.  D. 
Tenn.,  Sanford,  J.  The  case  involved  also  the  inclusion  of  home- 
stead interests  and  property  set  apart  for  the  widow.  The 
material  part  of  the  opinion  is  as  follows:  "The  estate  tax 
thus  imposed  is  clearly  not  a  tax  on  the  property  of  the 
decedent,  but  upon  its  transfer  or  transmission  by  will  or 
descent  from  the  decedent,  being  in  effect  a  tax  on  the  suc- 
cession from  the  decedent.  *  *  *  In  other  words,  the 
underlying  principle  is  that   in   the  first  instance  the   interest 


30  FEDERAL  ESTATE  TAX. 

Election  barring  dower. 

§  34.  Same — Election  barring  dower. 

If  dower  finally  proves  to  be  non-taxable  under 
the  Revenue  Act  of  1916,  a  question  would  still 
remain  as  to  provisions  made  for  the  wife  in  lieu  of 
dower  and  which  she  elects  to  accept,  thus  barring 
her  dower  right.  In  New  York  it  is  held  that  such 
a  provision  for  the  wife,  being  a  legacy  or  devise, 
comes  within  the  precise  provision  of  the  statute 
relating  to  such  dispositions  by  will,  and  is  tax- 
subject  to  the  tax  is  only  that  which  is  subject  to  charges 
against  the  estate  of  the  decedent  and  is  transferred  from 
him  to  others  at  his  death  by  will  or  descent.  The  crucial 
question  then  is  whether  upon  the  husband's  death  the  widow 
is  entitled  to  homestead,  dower  and  a  year's  support  by 
transfer  from  her  husband's  estate  and  in  succession  to  him, 
or  whether  her  right  to  these  interests  is  vested  in  her  by 
operation  of  law  independently  of  her  husband  and  not  trans- 
mitted to  her  through  him.  On  this  question  the  statutes  and 
rules  of  decision  in  Tennessee  and  Arkansas  where  the  dece- 
dent's property  is  located  are  controlling.  De Vaughn  v. 
Hutchinson,  165  U.  S.  566,  570. 

"It  is  settled  in  Tennessee  that  a  widow's  right  to  dower 
is  not  a  succession  to  the  title  of  her  husband  upon  his  death; 
that  she  does  not  succeed  in  her  dower  to  her  husband's  title, 
but  derives  it  by  the  marriage  and  her  right  as  wife,  to  be 
consummated  in  severalty  to  her  upon  her  husband's  death; 
and  that  she  takes  it  adversely  to  the  inheritance  from  the 
husband.  Crenshaw  v.  Moore,  125  Tenn.,  supra,  at  pages  534, 
535;  Kitts  v.  Kitts,  135  Tenn.  314,  319.  *  *  *  It  results 
that  as  the  widow  does  not  receive  either  her  homestead, 
dower  or  year's  support  in  succession  to  her  husband  or  by 
transfer  from  him,  but  takes  them  under  the  statutory  pro- 
visions   vesting    these    rights    in    her    independently    of    her 


GROSS  ESTATE.  31 


Dower  under  State  inheritance  tax  statutes. 

able.15  On  the  other  hand,  it  has  been  held  in 
Nebraska  that  the  substituted  provision  is,  to  the 
extent  of  the  dower  interest,  merely  representative 
of  dower;  that  it  has  the  same  taxable  status;  and 
that  it  is  consequently  exempt.16 

§  35.  Dower  under  State  inheritance  tax  statutes. 

The  question  whether  dower  is  taxable  under 
inheritance  tax  statutes  has  arisen  in  many  of  the 
States.  The  language  considered,  however,  is 
different  from  that  of  the  federal  act,  and  the  deci- 
sions are  not  decisive  of  the  present  question.  The 
provision  construed  is  usually  one  imposing  a  tax 

husband  and  adversely  to  his  estate,  the  property  assigned  to 
her  as  dower,  homestead  and  year's  support,  not  being  trans- 
ferred to  her  from  her  husband,  is  not  a  part  of  his  estate 
upon  which  the  tax  is  imposed  by  the  Federal  Estate  Tax. 

"Furthermore,  if  her  dower,  homestead  and  year's  support 
should  be  deemed  part  of  the  decedent's  gross  estate,  within 
the  meaning  of  the  estate  tax,  it  seems  that  they  would  be  in 
any  event  charges  against  the  estate  allowed  by  the  laws  of 
the  jurisdictions  under  which  the  estate  is  being  administered, 
and  hence,  in  any  event  to  be  deducted  from  the  value  of  the 
gross  estate  under  the  express  provisions  of  clause  (a)  (1)  of 
Section  203  of  the  Act."     (267  Fed.  Rep.,  pp.  995-6.) 

15.  In  re  DeGraaf's  Estate,  24  Misc.  147,  53  N.  Y.  Supp. 
591;  In  re  Riemann's  Estate,  42  Misc.  648,  87  N.  Y.  Supp.  731; 
In  re  Barbey's  Estate,  114  N.  Y.  Supp.  725;  In  re  Stuyvesant's 
Estate,  72  Misc.  295,  131  N.  Y.  Supp.  197. 

16.  In  re  Sanford's  Estate,  91  Neb.  752,  137  N.  W.  Rep. 
864.  On  rehearing,  overruling  the  original  decision  (90  Neb. 
410,  133  N.  W.  Rep.  870). 


32  FEDERAL  ESTATE  TAX. 

Dower  under  State  inheritance  tax  statutes. 

upon  the  passage  of  property  by  will  or  under  the 
intestate  laws  of  the  State.  In  Illinois  it  is  held  that 
the  "intestate  laws"  referred  to  embrace  all 
statutes  affecting  the  passage  of  a  decedent's 
property  at  his  death,  including  any  applicable  rule 
of  the  common  law;  and  consequently  that  dower 
rights  are  taxable.17  This  rule  is  extended  to  a 
provision  for  the  wife  in  lieu  of  dower  made  by  an 
ante-nuptial  agreement.18 

The  weight  of  authority,  however,  is  the  other 
way,  the  position  taken  being  that  the  wife  obtains 
her  interest  adversely  to  the  husband;  that  it  is  not 
transferred  from  him  to  her;  and  that  such  an  in- 
terest is  not  subject  to  tax.19 

And  the  same  ruling  is  made  as  to  an  absolute 
distributive  share  conferred  upon  the  wife  in  either 
real  or  personal  property  acquired  by  the  husband 
during  marriage,  whether  his  estate  was  legal  or 
equitable.20 

17.  Billings  v.  People,  189  111.  472,  59  N.  E.  Rep.  798;  arid. 
188  U.  S.  97. 

18.  People  v.  Field,  248  111.  147,  93  N.  E.  Rep.  721. 

19.  McDaniel  v.  Byrkett,  179  S.  W.  Rep.  (Ark.)  491;  In  re 
Sanford's  Estate,  91  Neb.  752,  137  N.  W.  Rep.  864;  In  re 
Riemann's  Estate,  42  Misc.  (N.  Y.)  648,  87  N.  Y.  Supp.  731; 
In  re  Weiler's  Estate,  122  N.  Y.  Supp.  608,  affd.  139  App. 
Div.  905,  124  N.  Y.  Supp.  1133;  Commonwealth's  Appeal,  34 
Pa.  St.  204;  Crenshaw  v.  Moore,  124  Tenn.  528,  137  S.  W.  Rep. 
924. 

20.  In  re  Strahan's  Estate,  93  Neb.  828,  142  N.  W.  Rep.  678; 
In  re  Bullen's  Estate,  47  Utah  96, 151  Pac.  Rep.  533. 


GROSS  ESTATE.  33 


Transfers — Transfers  prior  to  September  8,  1916. 
(c)    TRANSFERS   BY  THE  DECEDENT   IN    HIS   LIFE  TIME. 

§  36.  The  statute. 

Subdivision    (c)    of   Section   402   of   the   statute 

reads: 

"To  the  extent  of  any  interest  therein  of 
which  the  decedent  has  at  any  time  made  a 
transfer,  or  with  respect  to  which  he  has  at  any 
time  created  a  trust,  in  contemplation  of  or 
intended  to  take  effect  in  possession  or  enjoy- 
ment at  or  after  his  death  (whether  such  trans- 
fer or  trust  is  made  or  created  before  or  after 
the  passage  of  this  Act),  except  in  case  of  a 
bona  fide  sale  for  a  fair  consideration  in  money 
or  money's  worth.  Any  transfer  of  a  material 
part  of  his  property  in  the  nature  of  a  final  dis- 
position or  distribution  thereof,  made  by  the 
decedent  within  two  years  prior  to  his  death 
without  such  a  consideration,  shall,  unless 
shown  to  the  contrary,  be  deemed  to  have  been 
made  in  contemplation  of  death  within  the 
meaning  of  this  title." 
This  provision   raises   many  questions   of  much 

importance. 

§  37.  Transfers  prior  to  September  8,  1916. 

It  will  be  noticed  that  the  language  of  the  Revenue 
Act  of  1918  is  explicit.  The  statute  embraces  any 
transfer  or  trust  of  the  character  described, 
"whether  such  transfer  or  trust  is  made  or  created 
before  or  after  the  passage  of  this  Act."  The  earlier 


34  FEDERAL  ESTATE  TAX. 

Transfers  prior  to  September  8,  1916. 

Act  provided  for  the  inclusion  in  the  gross  estate 
of  property  ' '  of  which  the  decedent  has  at  any  time 
made  a  transfer,"  etc.21  While  not  as  explicit  as 
the  present  statute,  the  natural  construction  of  the 
language  points  to  a  transfer  made  by  the  decedent 
"at  any  time"  during  his  life,  without  reference  to 
the  time  of  the  passage  of  the  statute.  It  is  difficult, 
upon  any  other  construction,  to  give  force  to  the 
words  "at  any  time;"  and  the  Bureau  has  accord- 
ingly ruled  that,  "Such  transfers  are  taxable 
whether  made  before  or  after  September  8,  1916.  "22 
This  construction,  however,  has  been  disputed; 
and  the  question  is  now  being  litigated.  The  tax- 
payer lays  much  stress  upon  the  necessity  of  avoid- 
ing the  giving  of  retrospective  effect  to  the  language 
of  a  taxing  act.  The  rule,  however,  against  such  a 
construction  applies  only  where  the  language  is 
reasonably  susceptible  of  a  construction  making  the 
statute  prospective;  and  it  is  at  least  a  serious  ques- 
tion whether  the  language  in  question  does  not 
clearly  embrace  past  transfers.  The  alternative 
construction  leads  to  difficulties.  Where  the  trans- 
fer is  made  within  two  years  of  the  decedent's 
death,  it  is  prima  facie  taxable.  On  this  point  the 
language  of  the  statute  is  explicit;  and  the  rule  is 
applied  in  all  cases  in  which  the  decedent  died  after 

21.  Revenue  Act  of  1916,  Sec.  202  (b). 

22.  Regulations,  Art.  22.  This  ruling  was  originally  made 
in  Treasury  Decision  2385  (Oct.  21,  1916),  and  was  carried 
into  the  Regulations  of  May,  1917  (Art.  XIII). 


GROSS  ESTATE.  35 


The  decision  in  Shwab  v.  Doyle. 


September  8,  1916.  Obviously,  however,  if  the 
decedent  died  on  or  prior  to  September  7,  1918,  a 
transfer  made  within  two  years  of  his  death  might 
ante-date  the  passage  of  the  Revenue  Act  of  1916.23 
The  fact  that  the  Revenue  Act  of  1918  amends 
and  makes  more  explicit  the  description  of  the 
transfers  in  question  has  been  used  as  an  argument 
that  Congress  recognized  that  the  earlier  language 
was  insufficient.  This  argument,  however,  is  much 
weakened  by  the  fact  that  in  many  cases  the  courts 
have  held  the  more  explicit  language  of  an  amenda- 
tory statute  to  be  merely  interpretative  of  an  earlier 
and  construed  the  two  statutes  as  having  the  same 
meaning.24 

§  38.  Same — The  decision  in  Shwab  v.  Doyle. 

The  position  of  the  Bureau  has  thus  far  been 
supported  by  the  courts.25 

23.  It  is  noteworthy  that  there  is  long  established  precedent, 
for  imposing  a  tax  with  reference  to  transfers  already  executed. 
See  the  Succession  Tax  Acts  of  England  and  this  country, 
taxing  "every  past  or  future  disposition"  of  property  under 
which  the  decedent  should  become  beneficially  entitled  thereto 
(16  &  17  Vict.,  Chap.  51,  Sec.  2;  13  Stat.,  Chap.  173,  Sec.  127) ; 
and  the  English  Customs  and  Inland  Revenue  Act,  taxing 
absolute  gifts  when  made  within  a  specified  period  of  the 
decedent's  death,  44  &  45  Vict.,  Chap.  12,  Sec.  38,  sub-sec.  (2), 
par.  (a.) ;  52  &  53  Vict.,  Chap.  7,  Sec.  11,  sub-sec.  1. 

24.  Bailey  v.  Clark,  21  Wall.  284,  288;  Cope  v.  Cope,  137 
U.  S.  682,  688;  Johnson  v.  Southern  Pacific  Co.,  196  U.  S.  1, 
21;  AVetmore  v.  Markoe,  196  U.  S.  68,  77;  United  States  v. 
Coulby,  251  Fed.  Rep.  982,  985-986. 

25.  Shwab  v.  Doyle,  Circuit  Court  of  Appeals,  Sixth  Circuit  ; 


36  FEDERAL  ESTATE  TAX. 

The  decision  in  Shwab  v.  Doyle. 

In  the  case  cited  the  decedent  made  an  executed 
gift  inter  vivos  in  the  form  of  a  trust  over  a  year 
before  the  passage  of  the  original  Estate  Tax  Law 
of  1916.    This  trust  took  effect  at  once,  and  divested 
the  decedent  of  all  interest  in  the   property.     In 
holding  that  the  property  transferred  should  be  in- 
cluded in  the  gross  estate,  the  court  said,  inter  alia: 
"In   our   opinion   the    statute    evidences    an 
intent  on  the  part  of  Congress   that   the   tax 
should  apply  to  all  transfers  in  contemplation 
of   death,   whether  made   before   or   after  the 
passage  of  the  act,  provided  the  transferrer's 
death  occur  after  the  act  took  effect.    This  in- 
tent is,  we  think  evidenced  by  a  variety  of  con- 
siderations." 
The  Court  then  refers  to  the  words  "every  dece- 
dent" in  Section  201,  and  "at  any  time,"  "any 
transfer"  and  "within  two  years"  in  Section  202, 
of  the  Revenue  Act  of  1916,26  and  continues: 

"The  evident  theory  of  the  statute  is  that 
transfers  intended  to  take  effect  after  the  death 
of  the  grantor,  as  well  as  those  made  in  con- 
templation of  death,  are  equally  testamentary 
in  character.     *     *     * 

"While  the  interests  derived  by  a  grantee 
under  an  absolute  and  immediately   effective 

Knappen,  Denison  and  Donahue,  Circuit  Judges;  Dec.  10,  1920; 
not  yet  reported. 

26.  The  same  language  is  contained  in  Sees.  401  and  402  of 
the  present  statute. 


GROSS  ESTATE.  37 


Constitutional  questions. 


conveyance  in  contemplation  of  death  are 
vested,  the  same  is  true  of  any  irrevocable  con- 
veyance which  takes  effect  in  possession  or 
enjoyment  only  upon  the  death  of  the  grantor, 
although  in  the  latter  case  such  vesting  is 
merely  in  expectancy.  If  Congress  had  power, 
as  we  think  it  had,  to  tax  both  classes  of  con- 
veyances, even  if  made  before  the  passage  of 
the  act,  no  good  reason  suggests  itself  why  it 
should  desire  to  discriminate  between  the  two 
classes  of  transfers.  It  is  not  to  our  minds 
unnatural,  nor  is  it  necessarily  unjust,  that  Con- 
gress should  intend  that  one  taking  a  convey- 
ance of  a  testamentary  character,  entirely 
without  consideration,  should  do  so  at  the  risk 
of  having  the  transfer  taxed,  directly  or  in- 
directly, as  would  be  the  case  were  the  transfer 
by  will  or  by  conveyance  taking  effect  at  or 
after  the  grantor's  death." 

§  39.  Same — Constitutional  questions. 

Passing  the  question  of  construction,  it  has  been 
disputed  that  Congress  has  power  to  impose  an 
estate  tax  upon,  or  measure  it  with  reference  to, 
transfers  already  executed.  The  decision  in  Shwab 
v.  Doyle,  however,  upholds  the  power  of  Con- 
gress to  measure  the  tax  with  reference  to  transfers 
executed  before  it  went  into  operation.27  In  this 
case  the  court  said: 

27.  Shwab  v.  Doyle,  Circuit  Court  of  Appeals,  Sixth  Circuit ; 


38  FEDERAL  ESTATE  TAX. 

Constitutional  questions. 

"Is  the  statute  unconstitutional  as  applied 
to  the  trust  deed?  In  our  opinion  the  act,  if  so 
construed,  is  not  void  as  denying  due  process 
of  law  or  as  violating  the  fifth  amendment  to 
the     constitution.  *     *     It     (the     statute) 

does  not  affect  transfers  made  after  the  trans- 
ferrer's death.    Being  within  the  all-embracing 
power  of  Congress  over  the  subject  of  excise 
and  transfer  taxation,  it  is  not  necessarily  un- 
constitutional merely  because  retroactive.  *  * 
Decedent's  death  being  the  generating  source 
of  the  taxation,  and  the  statute  validly  classify- 
ing it  as  of  testamentary  character,  it  logically 
follows,  in  our  opinion,  that  it  is  valid  to  im- 
pose at  decedent's  death  a  tax  on  the  testa- 
mentary transfer  occurring  before  the  passage 
of  the  act,  regardless  of  the  fact  that  title  had 
already  passed  to  the  transferees." 
The  court  cites  and  relies  upon  the  cases  uphold- 
ing an  income  tax  measured  with  reference  to  in- 
come received  before  the  passage  of  the  statute,28 
and  the  decisions  that  a  legacy  tax  may  be  imposed 
by  a  statute  passed  after  the  death  of  the  decedent 
and  the  consequent  vesting  in  title  of  the  legacy.29 

Knappen,  Denison  and  Donahue,  Circuit  Judges;  Dec.  10,  1920; 
not  yet  reported. 

23.  Stockdale  v.  Insurance  Companies,  20  Wall.  323; 
Brushaber  v.  Union  Pacific  R.  R.  Co.,  240  U.  S.  1. 

29.  Carpenter  v.  Commonwealth,  17  How.  456;  Cahen  v. 
Brewster,  203  U.  S.  543. 


GROSS  ESTATE.  39 


Transfers  in  contemplation  of  death — Meaning  of  phrase. 
(1)    TRANSFERS   IN   CONTEMPLATION   OF   DEATH. 

§  40.  Distinguished  from  transfers  intended  to  take 
effect  after  death. 
The  provision  in  the  statute  as  to  transfers  "in 
contemplation  of  death"  should  be  carefully  differ- 
entiated from  that  relating  to  transfers  intended  to 
take  effect  at  or  after  death.  Both  provisions  are 
found  in  State  legislation,  an  examination  of  which 
shows  that  the  latter  provision  has  a  much  earlier 
origin  than  the  former.30 

§  41.  Meaning  of  the  phrase. 
The  Regulations  provide: 

"The  words  'in  contemplation  of  death'  do 
not  refer  to  the  general  expectation  of  death 
which  all  persons  entertain.  A  transfer,  how- 
ever, is  made  in  contemplation  of  death 
wherever  the  person  making  it  is  influenced  to 
do  so  by  such  an  expectation  of  death,  arising 
from  bodily  or  mental  conditions,  as  prompts 
persons  to  dispose  of  their  property  to  those 
whom  they  deem  proper  objects  of  their 
bounty.    The  cause  which  induces  such  bodily 

30.  The  provision  as  to  transfers  intended  to  take  effect 
after  death  found  its  way  into  State  inheritance  tax  legislation 
at  least  as  early  as  1826,  in  the  Pennsylvania  Statute  of  that 
year  (Laws,  1826,  Chap.  72,  p.  227,  sec.  1).  The  provision  as 
to  transfers  "in  contemplation  of  death"  seems  to  have 
appeared  first  in  the  New  York  Act  of  1892  (Laws,  1892, 
Chap.  399,  Sec.  1,  subd.  3). 


40  FEDERAL  ESTATE  TAX. 

State  court  definitions. 

or  mental  conditions  is  immaterial;  and  it  is 
not  necessary  that  the  decedent  be  in  the  im- 
mediate expectation  of  death."    (Art.  23.) 

§  42.  Same — State  court  definitions. 

The  phrase  "in  contemplation  of  death"  has  been 
often  defined  by  the  State  courts,  in  contruing  State 
statutes.  The  definitions  are  not  uniform,  and  even 
indicate  a  possible  difference  in  theory  as  to  the 
scope  of  the  language.  The  definitions  fall  roughly 
into  two  classes,  namely,  (a)  those  which  stress 
sickness  or  peril;  and  (b)  those  which  indicate 
merely  an  act  essentially  testamentary. 

The  principal  definition  of  the  first  character 
comes  from  New  York,  and  is  as  follows: 

"This  court  has  held  that  the  words  'in  con- 
templation of  the  death'  do  not  refer  to  that 
general  expectation  which  every  mortal  enter- 
tains, but  rather  the  apprehension  which  arises 
from  some  existing  condition  of  body  or  some 
impending  peril."31 
It  is  not  clear  that  this  definition  makes  sickness 
or  peril  an  absolute  condition  of  taxability.    It  does, 
however,  undoubtedly  lay  stress  upon  these  features 
of  the  case.     It  is  noteworthy  that  this  definition 
was,  in  its  origin,  simply  a  definition  of  a  gift  causa 
mortis.32    Thus,  the  definition  in  the  Baker  case  was 

31.  Matter  of  Baker,  83  App.  Div.  530,  533;  affd.  178  N.  Y. 
575. 

32.  The    Baker   ease    takes    the    definition    from    Matter   of 


GROSS  ESTATE.  41 


State   court   definitions. 


evidently  adopted  upon  the  theory  that  a  gift  causa 
mortis  and  a  gift  "in  contemplation  of  death"  were 
one  and  the  same.  This  theory,  however,  has  been 
exploded.33 

Other  definitions  of  the  term  "in  contemplation 
of  death"  do  not  stress  sickness  or  peril,  but  define 
it  so  as  to  embrace  all  acts  which,  though  not  testa- 
mentary in  form,  are  testamentary  in  character. 

"The  intention  (in  the  use  of  the  words  'in 
contemplation  of  death')  clearly  was  to  tax 
property  passing  by  will  or  the  intestate  laws 
of  the  State,  or  by  such  gifts  or  transfers  as  are 
of  like  nature  and  can  properly  be  classed  there- 
with."34 

"The  words  'in  contemplation  of  death'  as 
used  in  inheritance  tax  statutes,  do  not  refer 
to  that  general  expectation  of  death  enter- 
tained by  all  persons,  but  they  do  not  refer  to 
that  expectation  of  death  which  arises  from 
such  bodily  or  mental  conditions,  irrespective 
of  the  cause  in  any  particular  case,  which 
prompts  persons  to  dispose  of  their  property 
to  those  they  deem  entitled  to  their  bounty.35 

Spaulding  (49  App.  Div.  541) ;  and  the  latter  case  (49  App. 
Div.,  p.  548)  takes  it  from  Ridden  v.  Thrall  (125  N.  Y.  572, 
579).  The  language  thus  taken  from  Ridden  v.  Thrall  is 
nothing  but  a  definition  of  a  gift  causa  mortis. 

33.  See  pp.  45-6. 

34.  Rosenthal  v.  People,  211  111.  306,  309;  71  N.  E.  Rep.  1121. 

35.  Conway's  Estate  v.  State,  120  N.  E.  Rep.  (App.  Ct.  of 
Ind.)  717,  720. 


42  FEDERAL  ESTATE  TAX. 

Decision  in  Shwab  v.  Doyle. 

The  term  is  also  said  to  designate  "gifts  in  life 
substituted  for  gifts  by  will."36 

As  between  these  possibly  conflicting  theories,  the 
Bureau  has  adopted  the  broader  construction  of  the 
statute,  and  taken  the  position  that  it  embraces  all 
transfers  which,  although  not  testamentary  in  form, 
are  essentially  testamentary  in  character.  The  defi- 
nition in  the  Kegulations  corresponds  very  nearly 
with  that  given  by  the  court  in  the  Conway  case.37 

§  43.  Same — Decision  in  Shwab  v.  Doyle. 

The  position  taken  by  the  Bureau  concerning  the 
meaning  of  the  words  "in  contemplation  of  death" 

A  similar  definition  will  be  found  in  State  v.  Pabst  (139 
Wis.  561,  590,  121  N.  W.  Rep.  351),  with  the  omission,  how- 
ever, of  the  phrase  "  irrespective  of  the  cause  in  any  par- 
ticular case."  In  People  v.  Carpenter  (264  111.  400,  408;  106 
N.  E.  Rep.  302)  the  court  reverts  to  the  definition  in  the  Baker 
case.  In  People  v.  Danks  (289  111.  542,  547-548;  124  N.  E. 
Rep.  625)  the  term  "in  contemplation  of  death"  is  said  to 
refer  "to  that  apprehension  of  death  which  arises  from  some 
existing  infirmity  of  such  a  character  as  would  prompt  an 
ordinarily  prudent  person  to  make  a  disposition  of  his  prop- 
erty and  bestow  it  upon  those  whom  he  regarded  as  most 
entitled  to  be  the  recipients  of  his  bounty."  This  is  a  modified 
definition,  involving  some  of  the  elements  of  the  definition  in 
the  Rosenthal  case  and  some  of  those  in  the  Baker  case.  As 
will  be  seen,  there  is  considerable  variety  of  language  in  the 
various  definitions. 

36.  Estate  of  Reynolds,  169  Cal.  600,  604;  147  Pac.  Rep.  268. 

37.  120  N.  E.  Rep.,  p.  720. 


GROSS  ESTATE.  43 


Decision  in  Shwab  v.  Doyle. 


appears  to  be  fully  supported  by  the  recent  decision 
in  Shwab  v.  Doyle.38 

In  that  case  the  trial  judge  charged  as  follows : 
"By  the  term  'in  contemplation  of  death'  is 
not  meant  on  the   one   hand  the   general   ex- 
pectancy of  death  which  is  entertained  by  all 
persons,  for  every  person  knows  that  he  must 
die.     *     *     *     On  the  other  hand,  the  meaning 
of  the  term  is  not  necessarily  limited  to  an  ex- 
pectancy of  immediate  death,  or  a  dying  condi- 
tion.    *     *     *     The  term  'in  contemplation  of 
death'  involves  something  between  these  two 
extremes.    Nor  it  is  necessary,  in  order  to  con- 
stitute  a  transfer  in  contemplation  of  death, 
that  the  conveyance  or  transfer  be  made  while 
death  is  imminent,  while  it  is  immediately  im- 
pending   by    reason    of    bodily    condition,    ill- 
health,  disease  or  injury,  or  something  of  that 
kind.    But  a  transfer  may  be  said  to  be  made 
in  contemplation  of  death  if  the  expectation 
or  anticipation  of  death  in  either  the  immediate 
or   reasonably   distant   future   is   the   moving 
cause  of  the  transfer." 
The  court  also  refused  to  charge,  in  accordance 
with  the  language  of  certain  of  the  New  York  cases, 
that  "the  words  'in  contemplation  of  death'  do  not 
refer  to  that  general  expectation  of  death  which 

38.  Shwab  v.  Doyle,  Circuit  Court  of  Appeals,  Sixth  Circuit; 
Knappen,  Denison  and  Donahue,  Circuit  Judges;  Dec.  10,  1920; 
not  yet  reported. 


44  FEDERAL  ESTATE  TAX. 

Decision  in  Shwab  v.  Doyle. 

every  mortal  entertains,  but  rather  the  appre- 
hension which  arises  from  some  existing  condition 
of  body  or  some  impending  peril." 

The  appellate  court  sustained  these  rulings,  say- 
ing, among  other  things: 

"It  may  be  conceded  that  plaintiff's  requested 
instruction  would  have  been  proper  as  applied 
to  a  gift  claimed  to  have  been  made  causa  mortis 
— when  the  grantor  was  in  a  dying  condition. 
But  the  instant  case  presented  no  such  issue  or 
claim.  The  transfer  in  question  was  an  abso- 
lute gift  inter  vivos,  claimed  by  the  government 
to  have  been  testamentary  in  character.  On 
principle,  and  without  present  reference  to 
authority,  the  ultimate  question  concerns  the 
motive  which  actuated  the  grantor,  that  is  to 
say,  whether  or  not  a  specific  anticipation  or 
expectation  of  her  own  death,  immediate  or 
near  at  hand  (as  distinguished  from  the  general 
and  universal  expectation  of  death  some  time), 
was  the  immediately  moving  cause  of  the  trans- 
fer. Both  the  element  of  'existing  condition  of 
body,'  as  distinguished  from  the  grantor's 
mental  state  on  that  subject,  and  the  term 
'impending,'  are  inconsistent  with  the  prima 
facie  provision  of  Sec.  202  (b).39 

39.  The  reference  is  to  the  provision  of  the  original  Estate 
Tax  Law  that  certain  specified  transfers,  made  within  two 
years  of  the  decedent's  death,  are  prima  facie  "deemed  to 
have  been  made  in  contemplation  of  death."  Revenue  Act  of 
1916,  Sec.  202  (b). 


GROSS  ESTATE.  45 


Gifts  "in  contemplation  of  death." 


Plaintiff's   contention   also   overlooks 
the   contribution   which   may   be   made   to   the 
grantor's  state  of  mind  and  motive  by  a  realiza- 
tion of  the  fact  that  she  had  already  lived  many 
years  beyond  the  scriptural  limit." 
The  court  refuses  to  hold  that  "the  trial  court's 
definition  (is)  in  conflict  with  any  settled  and  con- 
trolling rule  of  construction;"  and  states  that,  "In 
our  opinion  the  decisions  relied  on  by  plaintiff  do 
not  completely  or  uniformly  support  his  definition." 
Many  State  court  decisions  are  reviewed;  and  par- 
ticular attention  is  given  to  the  fact  that  the  earlier 
New    York    decisions,    and    certain    others,    were 
affected  by  the  original  erroneous  theory  that  gifts 
"in  contemplation  of  death"  and  gifts  causa  mortis 
were  one  and  the  same. 

§  44.  Gifts  "in  contemplation  of  death"  and  gifts 
causa  mortis. 
The  theory  at  one  time  obtained  in  New  York 
that  gifts  "in  contemplation  of  death"  were'  simply 
gifts  causa  mortis;40  but  other,  and,  it  is  believed, 
better  reasoned  New  York  cases  give  a  broader 
construction  to  the  term,  so  as  to  embrace  certain 
sorts  of  gifts  inter  vivos;*1   and  the  original  rule 

40.  Matter  of  Edgerton,  35  App.  Div.  125,  54  N.  Y.  Supp. 
700;  Matter  of  Spaulding,  49  App.  Div.  541,  63  N.  Y.  Supp. 
694;  Matter  of  Mahlstedt,  67  App.  Div.  176,  73  N.  Y.  Supp. 
818;  Matter  of  Bullard,  76  App.  Div.  207,  78  N.  Y.  Supp.  491; 
Matter  of  Baker,  83  App.  Div.  530,  82  N.  Y.  Supp.  390. 

41.  Matter  of  Palmer,  117  App.  Div.  360,  102  N.  Y.  Supp. 


46  FEDERAL  ESTATE  TAX. 

Treatment  of   specific  cases. 

seems  to  have  been  finally  repudiated  in  New 
York.42 

The  original  New  York  rule  seems  never  to  have 
obtained  in  any  other  jurisdiction.  The  general  and 
well  established  doctrine  appears  to  be,  that  the 
term  "in  contemplation  of  death"  embraces 
executed  gifts  inter  vivos,  when  induced  by  the  con- 
templation of  death,  as  well  as  gifts  causa  mortis.*3 

§  45.  Same — Treatment  of  specific  cases. 

The  rule  appears  to  be  well  established  that  the 
question  whether  a  transfer  is  made  ' '  in  contempla- 
tion of  death"  is  a  question  of  fact.44 

236;  Matter  of  Birdsall,  22  Misc.  180,  49  N.  Y.  Supp.  450; 
Matter  of  Crary,  31  Misc.  72,  64  N.  Y.  Supp.  566;  Matter  of 
Price,  62  Misc.  149,  116  N.  Y.  Supp.  283. 

42.  In  re  Dee's  Estate,  210  N.  Y.  625,  104  N.  E.  Rep.  1128, 
affg.  148  N.  Y.  Supp.  423. 

43.  Rosenthal  v.  People,  211  111.  306,  71  N.  E.  Rep.  1121 
Estate  of  Merrifield  v.  People,  212  111.  400,  72  N.  E.  Rep.  446 
In  re  Estate  of  Benton,  234  111.  366,  84  N.  E.  Rep.  1026 
People  v.  Burkhalter,  247  111.  600,  93  N.  E.  Rep.  379;  Conway's 
Estate  v.  State,  120  N.  E.  Rep.  (App.  Ct.  of  Ind.)  717,  720 
State  v.  Pabst,  139  Wis.  561,  121  N.  W.  Rep.  351. 

44.  Estate  of  Reynolds,  169  Cal.  600,  603,  147  Pac.  Rep.  268 
Abstract  and  Title  Guaranty  Company  v.  State,  173  Cal.  691 
694,  161  Pac.  Rep.  264;  Spreckels  v.  State,  30  Cal.  App.  363 
368,  158  Pac.  Rep.  549;  McDougald  v.  Wulzen,  34  Cal.  App 
21,  23,  166  Pac.  Rep.  1033;  People  v.  Kelley,  218  111.  509,  514 
75  N.  E.  Rep.  1038;  In  re  Estate  of  Benton,  234  111.  366,  370 
84  N.  E.  Rep.  1026;  Conway's  Estate  v.  State,  120  N.  E.  Rep 
(App.  Ct.  of  Ind.),  717,  719. 


GROSS  ESTATE.  4? 


Treatment   of   specific   cases. 


As  has  already  appeared,  the  Bureau  includes  in 
the  gross  estate  property  transferred  when  the 
decedent  was  not  ill  or  in  the  immediate  appre- 
hension of  death.  In  such  cases,  however,  the  dece- 
dent is  ordinarily  of  advanced  age,  and  the  circum- 
stances indicate  that  he  is  executing  part  of  his 
testamentary  plan.  The  property  is  not  included 
solely  because  the  decedent  is  advanced  in  years.443 
The  test  applied  is  whether  the  act,  while  not  testa- 
mentary in  form,  is  essentially  testamentary  in 
character.  It  is  thus  important  to  ascertain 
whether  there  was  a  special  occasion  for  the  gift 
other  than  the  mere  handing  on  of  the  property  to 
the  objects  of  the  decedent's  bounty.  The  existence 
of  such  a  special  occasion  and  special  motive  tends 
to  negative  the  testamentary  character  of  the  gift, 
and  makes  for  the  exclusion  of  the  property  from 
the  gross  estate.  In  this  way,  weight  is  attributed 
to  the  fact  that  the  gift  is  a  Christmas  or  birthday 
present;  that  it  is  in  compensation  for  services 
rendered;  that,  although  made  at  an  advanced  age, 
it  is  merely  one  of  a  long  series  of  gifts  made  in 
pursuance  of  the  decedent's  policy  to  let  his  chil- 
dren have  such  property  as  should  not  be  necessary 
for  his  own  maintenance  and  the  charities  which  he 
supported.  Similar  weight  is  given  to  the  fact  that 
a  gift  of  stock,  made  near  the  date  of  the  decedent's 

44a.  For  a  specific  case  in  which  a  transfer  by  a  person  "well 
advanced  in  years"  was  held  not  to  be  taxable,  see  Polk  v. 
Miles,  268  Fed.  Rep.  175. 


43  FEDERAL  ESTATE  TAX. 

Advancements — Transfers   taking  effect   at   death. 

death,  is  but  the  final  step  in  a  plan  formed  many 
years  before  for  rendering  his  children  independent. 
The  ultimate  question  is,  however,  held  to  be  in 
every  case  a  question  of  fact,  depending  to  a  con- 
siderable extent  upon  its  own  particular  circum- 
stances. 


§  46.  Same — Advancements. 

The  Regulations  provide: 

"The  fact  that  a  gift  was  made  as  an  ad- 
vancement, to  be  taken  into  account  upon  the 
final  distribution  of  the  decedent's  estate,  is 
not  enough,  standing  alone,  to  establish  tax- 
ability ;  but  it  is  a  circumstance  to  be  considered 
in  determining  whether  the  transfer  was  made 
in  contemplation  of  death."     (Art.  23. )45 

(2)  TRANSFERS  INTENDED  TO  TAKE  EFFECT  AT  OR  AFTER 

DEATH. 

§  47.  In  general. 

A  provision  taxing  transfers  intended  to  take 
effect  at  or  after  the  death  of  the  grantor  is  now, 
it  is  believed,  contained  in  the  statutes  of  all  of  the 
States,  and  has  existed  in  some  of  them  for  many 
years.  The  provision  has  come  up  frequently  for 
construction;  and  certain  points  are  practically 
settled,  while  others  remain  in  more  or  less  doubt. 

45.  As  to  whether  payments  made  to  relatives  of  the  decedent 
constitute  advancements  or  loans,  see  pp.  24-5. 


GROSS  ESTATE.  49 


Transfers  with  reservation  of  income. 


§  48.  Same — Transfers  with  reservation  of  income. 
It  is  a  familiar  thing  for  the  owner  of  property 
to  make  a  transfer  of  it  (generally  in  the  form  of  a 
trust)  in  which  he  reserves  to  himself  the  income 
for  life.  It  has  been  frequently  held  that  such  a 
transfer  is,  in  its  operation  upon  the  principal  of 
the  fund,  one  intended  to  take  effect  at  the  death  of 
the  grantor,  and  consequently  taxable.46 

The  Bureau  rulings  follow  these  authorities.   The 
Regulations  provide: 

"A  transfer  is  taxable  where  the  grantor 
reserves  to  himself  during  life  the  income  of 
the  property  transferred.  In  such  a  case  the 
transfer  of  the  principal  takes  effect  in  posses- 
sion and  enjoyment  after  the  death  of  the 
grantor,  and  the  value  of  the  entire  property 
should  be  included  in  the  gross  estate."  (Art. 
24.) 

§  49.  Reservation  of  income  to  a  third  person. 

The  rule  holding  taxable  a  transfer  in  which 
there  is  a  reservation  of  income  has  been  extended 

46.  In  re  Moir's  Estate,  207  III.  180,  69  N.  E.  Rep.  905; 
People  v.  Kelley,  218  111.  509,  75  N.  E.  Rep.  1038;  Crocker  t. 
Shaw,  174  Mass.  266,  54  N.  E.  Rep.  549;  Douglas  County  ▼. 
Kountze,  84  Neb.  506,  121  N.  W.  Rep.  593;  In  re  Green's 
Estate,  153  N.  Y.  223,  47  N.  E.  Rep.  292;  In  re  Brandeth's 
Estate,  169  N.  Y.  437,  62  N.  E.  Rep.  563;  In  re  Cornell's 
Estate,  170  N.  Y.  423,  63  N.  E.  Rep.  445;  Wright's  Appeal,  38 
Pa.  St.  507;  In  re  Lines 's  Estate,  155  Pa.  St.  378,  26  Atl.  Rep. 
728. 


50  FEDERAL  ESTATE  TAX. 

Reservation  of  income  to  a  third  person. 

to  transfers  in  which  the  income  is  reserved  to 
someone  other  than  the  grantor  during  the  grantor's 
life,  the  principal,  at  the  grantor's  death,  to  go  to  a 
third  person.47 

In  accordance  with  these  authorities,  the  Regula- 
tions provide: 

"A  gift  of  the  principal  of  a  trust  fund  which 
takes  effect  at  or  after  the  decedent's  death  is 
taxable,  although  the  income  during  the  dece- 
dent's life  is  payable  to  someone  other  than 
himself.      Example:      The    decedent    transfers 
property  to  his  son,  the  latter  agreeing  to  pay 
the  income  to  his  mother  during  the  decedent's 
life.      The   transfer   to    the    son   is    taxable." 
(Art.  24.) 
This  rule,  however,  is  not  extended   to   a  case 
where  the  gift  of  the  principal  does  not,  in  terms, 
take  effect  at  or  after  the  death  of  the  decedent. 
Thus,  w-here  there  is  a  trust  to  pay  the  income  to  a 
relative  of  the  decedent,  and  upon  the  death  of  the 
life  tenant  to  pay  the  principal  to  others,  the  gift 
would   not   ordinarily   be   taxed,   although   it   was 
possible,  or  even  probable,  that  the  life  tenant  would 
survive  the  decedent. 

47.  New  England  Trust  Co.  v.  Abbott,  205  Mass.  279,  91  N. 
E.  Rep.  379;  State  Street  Trust  Co.  v.  Stevens,  209  Mass.  373, 
95  N.  E.  Rep.  851;  In  re  Cruger,  54  App.  Div.  405,  66  N.  Y. 
Supp.  636;  In  re  Patterson's  Estate,  127  N.  Y.  Supp.  284,  affd. 
146  App.  Div.  286,  130  N.  Y.  Supp.  970. 


GROSS  ESTATE.  51 


Reservation  of  part  of  income. 


§  50.  Reservation  of  part  of  income. 

This  question  has  also  arisen  under  State 
statutes ;  and  it  has  been  held  that,  where  a  portion 
of  the  income  is  reserved  to  the  grantor,  a  corre- 
sponding portion  of  the  property  transferred  is  tax- 
able.48 Similarly,  when  the  grantor  reserves  an 
annuity,  it  has  been  held  that  so  much  of  the  prin- 
cipal transferred  as  is  necessary  to  produce  the 
annuity  is  taxable.49 

The  Bureau  rulings  are  to  the  same  effect.  The 
Regulations  provide : 

''Where  the  grantor  reserves  a  proportionate 
part  of  the  income,  only  a  corresponding  pro- 
portion of  the  property  should  be  included  in 
the  gross  estate,  unless  the  transfer  was  made 
in  contemplation  of  death.50  If,  for  example, 
he  reserves  one-half  of  the  income,  the  value  of 
one-half  of  the  property  transferred  should  be 
included  in  the  gross  estate.  If  he  reserves  an 
annuity,  so  much  of  the  property  as  is  neces- 
sary to  produce  the  annuity  should  be  included 
in  the  gross  estate.  Where  the  property  does 
not  produce  income,  its  value  as  of  the  date  of 
the  decedent's  death  should  be  ascertained,  and 
so  much  of  this  sum  as  is  necessary  to  produce 
the  annuity  should  be  included  in  the  gross 
estate."     (Art.  24.) 

48.  In  re  Moir's  Estate,  207  111.  180,  69  N.  E.  Rep.  905. 

49.  People  v.  Kelley,  218  111.  509,  75  N.  E.  Rep.  1038. 

50.  In  which  case,  of  course,  the  entire  transfer  would  bo 
taxable. 


52  FEDERAL  ESTATE  TAX. 

Contract  by  grantee — Reservation  of  power  of  revocation. 

§  51.  Contract  by  grantee. 

The  principle  that  a  transfer  is  taxable  where 
the  grantor  reserves  the  income,  or  the  right  to  an 
annuity,  has  been  extended  to  cases  in  which, 
instead  of  an  express  reservation,  the  grantee,  in 
consideration  of  the  transfer,  contracts  to  pay  an 
annuity  to  the  grantor.51 

The  Bureau  ruling  is  to  the  same  effect.  The 
Regulations  provide: 

"A  transfer  is  taxable  in  accordance  with 
these  principles  whether  the  grantor  makes  a 
reservation  of  the  annuity  out  of  the  property 
conveyed,  or  exacts  from  the  grantee  an  agree- 
ment to  pay  the  annuity."     (Art.  24.) 

§  52.  Reservation  of  power  of  revocation. 

The  Regulations  provide: 

"Property  held  in  trust  under  any  instru- 
ment in  which  the  grantor  has  reserved  a  power 
of  revocation,  or  any  power  which  has  that 
effect,  constitutes  a  part  of  the  gross  estate  of 
such  grantor  for  the  purpose  of  this  tax.  For 
example,  where  a  father  places  property  in 
trust  for  the  present  benefit  of  his  son,  but 
reserves  power  to  revoke  the  trust  at  any  time 
during  his  life,  the  entire  property  transferred 

51.  Reish  v.  Commonwealth,  106  Pa.  St.  521.  But,  appar- 
ently contra,  see  Polk  v.  Miles,  268  Fed.  Rep.  175;  Matter  of 
Edgerton,  35  App.  Div.  125,  54  N.  Y.  Supp.  700,  affd.  158  N.  Y. 
671,  52  N.  E.  Rep.  1124;  Matter  of  Thorne,  44  App.  Div.  8, 
60  N.  Y.  Supp.  419,  affd.  162  N.  Y.  238,  56  N.  E.  Rep.  625. 


GROSS  ESTATE.  53 


Reservation   of   power  of   revocation. 


should  be  included  in  the  gross  estate."     (Art. 

25.) 
The  State  court  decisions  appear  to  be  adverse  to 
this  ruling.  That  is,  it  has  been  held  that  the  mere 
existence  in  a  trust  deed  of  a  power  of  revocation 
does  not  render  the  transfer  taxable  as  one  intended 
to  take  effect  at  the  death  of  the  grantor.52 

52.  Matter  of  Masury,  28  App.  Div.  580,  affd.  159  N.  Y.  532; 
People  v.  Northern  Trust  Co.,  289  111.  475,  124  N.  E.  Rep.  662. 

These  decisions  construe  State  statutes.  The  weight  of  the 
Masury  case  as  an  authority  is  somewhat  impaired  by  a  sub- 
sequent decision  of  the  New  York  Court  of  Appeals  in  which 
it  is  intimated  that  the  court  "may  have  gone  too  far"  in 
affirming  the  decision  of  the  lower  court,  and  that  "certainly 
the  limit  was  then  reached,  beyond  which  the  courts  could  not 
go  without  emasculating  the  provisions  of  the  statute." 
Matter  of  Bostwick,  160  N.  Y.  489,  493;  55  N.  E.  Rep.  208. 

In  Matter  of  William  B.  Dana  Company  (215  N.  Y.  461, 
463-464;  109  N.  E.  Rep.  557)  the  power  of  revocation  was 
coupled  with  other  powers  tending  to  render  the  transfer  tax- 
able; but  the  court  lays  stress  upon  the  power  of  revocation, 
stating  that  the  instrument  "was  just  as  capable  of  revoca- 
tion as  a  will  would  have  been,"  and  "must  be  regarded  as 
speaking  from  the  time  when  it  became  effective  by  reason  of 
the  death  of  the  party  who  executed  it."     215  N.  Y.,  p.  464. 

If  the  power  to  control  the  administration  of  a  trust  renders 
the  transfer  taxable  (see  infra  p.  54),  it  is  not  clear  why 
the  same  result  should  not  follow  from  the  reservation 
of  a  power  of  revocation.  The  power  to  destroy  would 
appear  to  be  at  least  as  incompatible  with  an  outright  gift 
as  a  power  to  regulate.  The  question  may  be  affected  in 
some  of  the  States  by  statutes.  Thus  it  is  frequently  provided 
(see,  for  instance.  Revised  Laws  of  Minnesota,  1905,  Sec.  327!); 
Cons.  Laws  of  New  York,  Chap.  50,  Sec.  145)  that,  where  the 
grantor  reserves  an   absolute  power  of  revocation  for  his  own 


54  FEDERAL  ESTATE  TAX. 

Reservation  of  power  to  control  administration  of  trust. 

§  53.  Reservation  of  power  to  control  administra- 
tion of  trust.53 
The  Regulations  of  1919  provide: 

"A  transfer  by  way  of  trust  is  also  taxable 
where  the  grantor  reserves  power  to  control 
the  administration  of  the  trust,  as  by  reserving 
power  to  change  the  trustee,  the  trust  period, 
the  trust  property,  or  the  respective  interests 
of  the  beneficiaries  in  such  property."     (Art. 
25.) 
This  rule  seems  to  find  support  in  certain  State 
court   decisions,   construing   State   statutes,   which 
hold  that  transfers  with  reservations  of  the  char- 
acter described  are  taxable  as  transfers  intended  to 
take  effect  at  death.54     The  above  sentence,  how- 
ever, is  ommitted  from  the  revision  of  1921,  the 
apparent  intention  being  to  include  only  cases  where 
the  reservation  is  tantamount  to  a  reserved  power  of 
revocation.     (See  pp.  52,  394.) 

benefit,  he  shall  be  deemed  the  absolute  owner  of  the  estate 
as  to  creditors  and  purchasers. 

53.  See  in  this  connection  the  treatment  of  insurance  policies 
in  which  the  decedent  reserves  the  right  to  change  the  benefici- 
ary.   Infra,  p.  84. 

54.  Matter  of  Bostwick,  160  N.  Y.  489,  55  N.  E.  Rep.  208; 
Matter  of  William  B.  Dana  Company,  215  N.  Y.  461;  109  N.  E. 
Rep.  557. 

In  the  Bostwick  case,  power  was  reserved  "to  alter,  or 
amend,  the  trust  by  notice  to  the  trustee;  to  withdraw,  or  to 
exchange,  any  securities,  and  to  control  the  acts  of  the  trustee 
in  selling,  or  disposing  of,  the  securities,  or  with  respect  to 
investments."  160  N.  Y.  493.  There  was  "no  reservation  of 
power  to   direct   the  payment   of   the   income   of  the  trusts" 


GROSS  ESTATE.  55 


Reservation  of  right  of  occupation. 


§  54.  Deposit  in  trust. 

A  deposit  by  the  decedent  of  money  in  bank  as 
"Trustee"  for  another,  the  same  to  be  paid  to  such 
other  person  at  the  death  of  the  decedent,  is  held 
to  constitute  a  transfer  intended  to  take  effect  at 
the  decedent's  death  and  to  be  taxable,  although 
the  decedent  reserves  the  right  to  withdraw  any 
part  of  the  money  during  his  life.55 

§  55.  Property  placed  in  escrow. 

Where  stock  is  placed  in  escrow,  to  be  delivered 
only  at  the  decedent's  death,  the  transfer  is  held  to 
be  taxable  as  one  intended  to  take  effect  only  at  the 
decedent's  death. 

§  56.  Reservation  of  power  to  vote  stock. 

Similarly,  a  transfer  of  corporate  stock  is  held  to 
be  taxable  as  one  intended  to  take  effect  at  the 
death  of  the  grantor  where  he  reserves  the  right  to 
vote  the  stock  and  receive  a  salary  coming  to  him 
in  this  way  as  an  officer  of  the  corporation. 

(p.  490).  It  is  said  that  these  provisions  indicated  "an  inten- 
tion on  the  donor's  part  to  retain  a  dominion  over  the  prop- 
erties transferred,  and  do  not  consist  with  an  existing  pur- 
pose to  vest  the  absolute  right  to  present  and  future  enjoyment 
in  the  beneficiaries;"  that  the  decedent  "retained  practical 
control  of  the  trust  property  and  left  the  question  of  its 
beneficial  enjoyment  and  eventual  possession  open  until  hi.s 
death"  (p.  493). 

55.  Quaere,  whether  the  same  result  might  not  be  reached 
upon  the  theory  that  the  account  was  a  joint  one,  taxable 
under  subd.  (d)  of  Sec.  402. 


56  FEDERAL  ESTATE  TAX. 

Sales — Illustration  of   sales. 

§  57.  Reservation  of  right  of  occupation. 

Similarly,  it  has  been  held  that,  where  the 
grantor  of  a  residence  reserves  the  right  to  live 
there,  a  proportion  of  the  entire  property  equal  to 
the  extent  of  the  use  reserved  should  be  included  in 
the  gross  estate. 

§  58.  Sales. 

After  providing  for  the  inclusion  in  the  gross 
estate  of  property  conveyed  in  contemplation  of 
death,  or  by  transfer  intended  to  take  effect  at  or 
after  death,  the  statute  contains  this  exception: 
"except  in  case  of  a  bona  fide  sale  for  a  fair  con- 
sideration in  money  or  money's  worth."  (Art.  402 
[c].)56 

§  59.  Same — Illustrations  of  sales. 

A  contract  between  the  owner  of  a  business  and 
the  premises  in  which  it  is  conducted  to  transfer 
the  same  at  or  after  his  death  to  his  partners  in 
consideration  of  the  payment,  during  the  lives  of 
himself  and  his  wife,  of  a  share  of  the  profits  of  the 
business,  is  held  to  be  a  sale  for  a  fair  considera- 
tion, and  not  taxable.  The  same  has  been  held  of  a 
separation  agreement,  providing  for  the  support  of 

56.  It  is  the  general  tendency  to  confine  inheritance  taxes  to 
transactions  which  are  donative  in  character.  See  Gleason  & 
Otis  on  Inheritance  Taxation,  2d  Ed.,  p.  104;  Knowlton  v. 
Moore,  178  U.  S.  41,  65-66;  Herold  v.  Blair,  158  Fed.  Rep.  804, 
806;  In  re  Orvis's  Estate,  223  N.  Y.  1,  119  N.  E.  Rep.  88;  In  re 
Borden's  Estate,  159  N.  Y.  Supp.  346,  351;  Hagerty  v.  State, 
55  Ohio  St.  613,  45  N.  E.  Rep.  1046.  Some  of  the  statutes  are 
not  as  explicit  as  the  federal  act. 


GROSS  ESTATE.  57 


Joint   interests — Character  of  estate — Survivorship. 

the  wife  and  children,  in  consideration  of  which  the 
wife  releases  all  interest  in  the  decedent's  property. 
And  the  same  ruling  has  been  made  where  the  de- 
cedent transferred  property  for  an  interest  in  other 
property,  larger  in  amount,  but  contingent  upon  his 
surviving  his  mother,  and  although  the  decedent's 
motive  in  making  the  transfer  was  to  carry  out  the 
wishes  of  a  third  person,  under  whose  will  he  had 
received  the  property  which  he  conveyed.  On 
the  other  hand,  it  is  ruled  that  a  transfer  made 
in  order  to  extinguish  an  existing  claim  by  accord 
and  satisfaction  is  not  such  a  sale  as  the  statute 
contemplates,  the  transfer  being  made  to  quiet  the 
claim  and  not  for  a  price. 

(d)    JOINT  INTERESTS 

§  60.  The  statute. 
Subdivision  (d)  of  Section  402  reads: 

"To  the  extent  of  the  interest  therein  held 
jointly  or  as  tenants  in  the  entirety  by  the 
decedent  and  any  other  person,  or  deposited  in 
banks  or  other  institutions  in  their  joint  names 
and  payable  to  either  or  the  survivor,  except 
such  part  thereof  as  may  be  shown  to  have 
originally  belonged  to  such  other  person  and 
never  to  have  belonged  to  the  decedent." 

§  61.  Character  of  estate — Survivorship.57 

The  distinguishing  feature  of  the  interests  here 

57.  The   Regulations  give   the   following   illustrations   of  the 
interests  embraced  in  the  statute: 


58  FEDERAL  ESTATE  TAX. 

Estates  held  in  common — Community  property. 

considered  is  the  right  of  survivorship,  the  most 
important  incident  of  the  joint  estate  at  common 
law,  which  is  found  also  in  estates  by  the  entirety. 
The  subdivision  consequently  does  not  embrace — 

§  62.  Estates  held  in  common. 

The  Regulations  so  provide,  holding  that: 
"It  (subdivision  [d])  does  not  include  interests 
held  as  tenants  in  common,  where  the  interest 
of  each  tenant  passes  to  his  estate,  free  from 
any  right  of  survivorship."     (Art.  27.) 

§  63.  Community  property.58 

The  interest  of  the  husband  and  wife  in  com- 
munity property  is,  under  the  statutes  of  all  the 
States  in  which  the  system  exists,  quite  different 

"Real  estate  held  jointly;  real  estate  held  by  husband  and 
wife  (known  as  an  estate  in  the  entirety) ;  money  deposited  in 
a  bank  or  trust  company  in  the  joint  names  of  the  decedent 
and  another  and  payable  to  either  or  the  survivor;  joint  trading 
accounts  with  brokers;  stocks  and  bonds  held  in  the  joint 
names  of  several  owners."     (Art.  27.) 

58.  The  subject  of  community  property  is  not  expressly 
mentioned  in  either  the  statute  or  the  present  Regulations. 
The  Regulations  of  May,  1917,  however,  provide  that,  "Where 
community  property  is  held  in  partnership  by  husband  and 
wife  during  the  lives  of  both,  one-half  the  whole  value  of  the 
community  property  is  to  be  included  in  the  gross  estate  of 
the  decedent  husband  or  wife"  (Regulations  No.  37,  Revised 
May,  1917,  Art.  XV).  It  is  added  that,  where  the  wife's 
interest  amounts  to  no  more  than  a  dower  right,  the  entire 
property  should  be  included  in  the  gross  estate  of  the  husband; 


GROSS  ESTATE.  59 


Community  property. 


from  the  right  of  a  joint  tenant  at  common  law. 
The  survivor  does  not  take  the  entire  property  by 
right  of  survivorship,  but  ordinarily  receives  one- 
half  of  it,  not  by  inheritance  or  survivorship,  but 
in  virtue  of  an  interest  existing  during  the  marriage. 
The  Bureau  has  consequently  ruled,  as  a  general 
proposition  and  in  accordance  with  the  local  law, 
that  one-half  of  the  community  property  should  be 
included  in  the  gross  estate  of  either  husband  or 
wife. 

An  exception  to  this  rule,  however,  obtained  in  the 
State  of  California.59  The  courts  of  this  State  hold 
that  the  interest  of  the  wife  is  a  bare  expectancy, 
and  that  the  husband  is  virtually  the  sole  owner  of 
the  property.00    In  pursuance  of  this  local  rule  the 

also  that,  "This  is  the  rule,  too,  where  the  husband's  interest 
in  such  property  is  equivalent  merely  to  the  curtesy  right" 
(Id.).  It  is  apparently  meant  that  in  the  case  last  stated  the 
entire  property  is  included  in  the  estate  of  the  wife.  It  is  by 
no  means  clear  that  under  any  State  law  the  community  interest 
is  analogous  to  dower  or  courtesy. 

59.  This  is  apparently  the  only  exception  to  the  rule. 

60.  In  re  Burdick's  Estate,  112  Cal.  387,  44  Pac.  Rep.  734; 
Spreckels  v.  Spreckels,  116  Cal.  339,  48  Pac.  Rep.  228;  Peiser  v. 
Griffin,  125  Cal.  9,  57  Pac.  Rep.  690;  In  re  Moffitt's  Estate,  153 
Cal.  389,  95  Pac.  Rep.  653,  affd.  sub.  nom.  Moffitt  v.  Kelly,  218 
U.  S.  400. 

To  call  property  of  such  a  character  "community  property" 
is,  of  course,  a  misnomer.  The  statutes  of  California  are  not 
sufficiently  different  from  those  of  other  States  to  warrant 
such  a  radical  distinction.  The  State  courts  manifest  an 
apparent  misconception  of,  or  prejudice  against,  the  community 


60  FEDERAL  ESTATE  TAX. 

Community  property. 

Bureau,  in  cases  governed  by  the  laws  of  California, 
includes  the  whole  of  the  so-called  "community 
property"  in  the  gross  estate  of  the  husband,  and 
none  of  it  in  the  gross  estate  of  the  wife. 

The  Bureau  has  applied  this  rule  to  the  estates  of 
all  decedents  dying  after  September  8,  1916.  A  re- 
cent court  decision,  however,  will,  unless  reversed, 
prevent  the  inclusion  in  the  gross  estate  of  the  de- 
ceased husband  of  more  than  one-half  of  the  com- 
munity property  in  any  case  in  which  the  death  oc- 
curred after  July  27,  1917.  On  this  date  two  stat- 
utes took  effect  in  California,  one  of  them  requiring 
the  signature  of  the  wife  to  deeds  or  mortgages  of 
the  community  real  property,  or  leases  thereof  for 
more  than  one  year;603  and  another  establishing  an 
inheritance  tax,  and  providing  "that  for  the  pur- 
pose of  this  act  the  one-half  of  the  community  prop- 
erty which  goes  to  the  surviving  wife  on  the  death 
of  the  husband  *  *  *  shall  not  be  deemed  to 
pass  to  her  as  heir  to  her  husband,  but  shall,  for  the 
purpose  of  this  act,  be  deemed  to  go,  pass  or  be 
transferred  to  her  for  valuable  and  adequate  con- 
sideration and  her  said  one-half  of  the  community 
shall  not  be  subject  to  the  provisions  of  this  act."60b 

property  system.  In  this,  as  in  many  other  cases,  the  Federal 
Government  is  bound  to  take  the  local  law  as  it  finds  it,  and 
make  a  corresponding  rule. 

60a.  Statutes,  1917,  Chap.  583,  Sees.  1,  2;  amending  Sec. 
172  of  the  Civil  Code,  and  adding  thereto  Sec.  172a. 

60b.  Statutes,  1917,  Chap.  587,  Sec.  1,  par.  2. 


GROSS  ESTATE.  61 


Taxable   portion   of  property — Consideration    furnished. 

It  has  been  held  that  this  legislation  changed  the 
character  of  the  wife's  interest  in  community  prop- 
erty as  previously  determined;  and  that  only  one- 
half  of  the  community  personal  property  should  be 
included  in  the  gross  estate  of  a  husband  dying  after 
the  amendatory  legislation  took  effect.61 

§  64.  Taxable  portion  of  property — Consideration 
furnished. 
Subdivision  (d)  of  Section  402  of  the  statute 
specfies,  first,  a  subject  matter  for  inclusion  in  the 
gross  estate;  second,  a  deduction  therefrom.  The 
inclusion  is  of  the  entire  joint  interest.  The  deduc- 
tion is  of  such  part  "thereof"  (of  the  entire  in- 
terest) as  appears  to  have  "belonged"  originally 
to  some  one  other  than  the  decedent,  and  never  to 
have  "belonged"  to  him.  The  test  here  adopted  is 
evidently  the  furnishing  of  the  consideration  for  the 

61.  Blum  v.  Wardell,  U.  S.  Dist.  Court,  N.  D.  Cal.,  Rudkin, 
J.,  not  yet  reported.  The  court  said  that  if  the  amendatory 
act,  "does  not  recognize  in  the  wife  a  valid,  subsisting,  vested 
interest  and  estate  in  the  community  property  during  the  life 
of  the  husband,  language  is  without  meaning  and  legislation 
without  avail."  This  decision  was  made  despite  the  fact  "that 
there  has  been  no  change  in  the  community  property  laws  so 
far  as  concerns  personal  property. ' '  The  court  shows  some 
dissatisfaction  with  the  California  decisions,  and  also  their 
result  in  making  California  an  exception  to  the  ordinary  rule 
that  only  one-half  of  the  community  property  is  included  in 
the  gross  estate  of  the  husband.  The  decision,  however,  is  not 
authority  in  a  case  where  the  decedent  died  prior  to  July 
27,  1917. 


62  FEDERAL  ESTATE  TAX. 

Taxable  portion   of   property — Consideration   furnished. 

joint  interest,  thus  avoiding  difficulties  which  had 
previously  troubled  the  courts.62  It  does  not  seem 
possible  to  give  any  other  construction  to  the 
language  used.  It  contemplates  a  case  in  which 
the  property  may  always  have  "belonged"  to  the 
other  joint  tenant,  and  never  have  " belonged"  to 
the  decedent.  If  title  were  the  test,  this  could  never 
happen.  The  theory  evidently  is,  that  the  property 
"belongs"  to  the  respective  tenants  to  the  extent  to 
which  each  furnishes  a  valuable  consideration  for 
his  interest;  and  there  are  State  court  decisions 
applying  this  test  in  the  case  of  bank  deposits.63 

The  Kegulations  adopt  this  theory,  providing  as 
follows : 

"The  value  of  such  property  to  be  returned 
for  tax  is  the  value  of  the  entire  property, 
unless  it  can  be  shown  that  part  of  it  originally 
belonged  to  the  other  joint  owner  and  never 

62.  See  infra,  pp.  66-70. 

63.  Matter  of  Kline,  65  Misc.  446,  121  N.  Y.  Supp.  1090; 
Matter  of  Durfee,  79  Misc.  655,  140  N.  Y.  Supp.  594;  In  re 
Rosenberg's  Estate,  114  N.  Y.  Supp.  726. 

It  is  interesting  to  compare  with  the  Federal  Statute  the 
language  of  the  English  Customs  and  Inland  Revenue  Act  of 
1881,  which  embraces,  "Any  property  which  a  person  *  *  * 
having  been  absolutely  entitled  thereto,  has  voluntarily  caused 
or  may  voluntarily  cause  to  be  transferred  to  or  vested  in 
himself  and  any  other  person  jointly,  whether  by  disposition 
or  otherwise,  so  that  the  beneficial  interest  therein,  or  in  some 
part  thereof,  passes  or  accrues  by  survivorship  on  his  death 
to  such  other  person."  44  &  45  Vict.,  Chap.  12,  Sec.  38  (2) 
(b). 


GROSS  ESTATE.  63 

Taxable  portion   of  property — Consideration   furnished. 

belonged  to  the  decedent.  In  order  to  excludo 
any  part  of  such  property  from  the  gross  estate 
the  executor  must  show  an  original  contribu- 
tion of  value  by  some  person  other  than  the 
decedent.  If  such  a  contribution  can  be  estab- 
lished, the  proportion  thereof  to  the  entire  pur- 
chase price  represents  the  interest  in  the  prop- 
erty which  should  be  excluded  from  the  gross 
estate.  Three  cases  may  arise:  (1)  The  dece- 
dent may  have  paid  the  entire  purchase  price, 
in  which  case  the  entire  property  should  be  in- 
cluded; (2)  the  decedent  may  have  paid  only  a 
portion  of  the  purchase  price,  in  which  case 
only  a  corresponding  portion  of  the  property 
should  be  included;  (3)  the  decedent  may  have 
paid  no  part  of  the  purchase  price,  in  which 
case  no  part  of  the  property  should  be  included. 
In  the  case  of  bank  deposits,  the  same  rule 
applies;  that  is,  the  interest  of  the  decedent  in 
the  account  is  determined  by  the  amount  of  his 
contribution."    (Art.  28.) 

The  general  purpose  of  the  Estate  Tax  Law  appears  to  have 
been  the  same,  namely,  to  include  voluntary  transfers  taking 
the  form  of  the  creation  of  a  joint  interest,  the  language  used 
being  broad  enough  to  include  cases  in  which  the  title  was 
originally  taken  in  the  joint  name  of  the  decedent  and  another. 
It  is  noteworthy  that  the  provision  quoted  from  the  English 
Act  of  1881,  when  incorporated  into  the  Finance  Act  of  1894, 
was  modified  so  as  to  strike  out  the  word  "voluntarily.'' 
57  &  58  Vict.,  Chap.  30,  Sec.  II  (1)   (c). 


64  FEDERAL  ESTATE  TAX. 

Estates  by  the  entirety — Time  of  creation  of  interest. 

§  65.  Estates  by  the  entirety. 
The  Regulations  provide: 

"Property  owned  by  husband  and  wife  as 
tenants  in  the  entirety  is  governed  by  the  rule 
given  above.  The  whole  value  of  the  property 
must  be  included,  in  the  absence  of  a  showing 
as  to  the  original  contributions.  An  exception 
is  made,  however,  where  property  is  conveyed 
to  husband  and  wife  without  valuable  con- 
sideration, or  where  the  property  was  pur- 
chased out  of  common  funds,  representing  the 
savings  of  husband  and  wife,  or  wTas  the  fruit 
of  joint  labor,  the  proportion  of  the  several 
contributions  having  been  lost  sight  of.  In 
such  cases,  one-half  of  the  total  value  of  the 
property  should  be  returned."     (Art.  29. )64 

§  66.  Time  of  creation  of  interest. 

Neither  the  Revenue  Act  of  1916,  nor  the  Revenue 
Act  of  1918,65  refer  to  the  time  of  the  creation  of 
the  joint  interest.  The  statute,  in  constituting  the 
gross  estate,  refers  to  the  date  of  the  decedent's 
death.    In  terms,  it  directs  the  inclusion  of  all  joint 

64.  There  seems  to  be  no  reason  why  the  rule  here  indicated 
should  not  apply  to  joint  interests,  as  well  as  estates  by  the 
entirety.  That  is,  where  no  consideration  was  paid,  or  where 
the  evidence  indicates  the  acquisition  of  the  interest  by  an 
equal  contribution  of  money  or  labor,  one-half  of  the  interest 
should  be  included  in  the  gross  estate  of  either  joint  tenant. 

65.  The  two  statutes  contain  identical  language  on  this  sub- 
57  &  58  Vict.,  Chap.  30,  Sec.  II  (1)  (c). 


GROSS  ESTATE.  65 


Time  of  creation  of  interest. 


interests  then  existing,  without  reference  to  whether 
they  were  created  before  or  after  September  8,  1916. 
The  Bureau  has  so  ruled,  and  includes  joint  in- 
terests without  reference  to  the  time  of  their 
creation.  This  ruling  is  contrary  to  a  recent  de- 
cision, in  which  it  is  held  that  only  one-half  of  prop- 
erty held  jointly  by  husband  and  wife  should  be  in- 
cluded in  the  gross  estate  of  the  husband,  where  the 
joint  interest  was  created  prior  to  September  8, 
1916.66 

66.  Kissam  v.  McElligott,  U.  S.  District  Court,  Southern 
District  of  N.  Y.,  Mayer,  J.;  not  yet  reported.  The  reason- 
ing is  as  follows : 

"It  is  true  that  section  201  provides  that  the  tax  is  imposed 
upon  the  transfer  of  the  net  estate  of  'every  decedent  dying 
after  the  passage  of  this  Act;'  but  the  assumption  must  be 
that  this  relates  to  estates  thereafter  created  and  not  to  then 
existing  vested  property. 

"If  it  be  argued  that  in  taxing  the  succession  or  transfer 
involved  in  the  passing  of  the  interest  of  Jonas  to  Cornelia, 
the  measure  of  the  tax  was  the  extent  of  the  interest  of  both, 
the  result  is  the  same. 

"At  the  time  the  statute  was  passed  Cornelia  Kissam 's  in- 
terest belonged  to  her. 

"In  other  words,  the  time  of  the  transfer  of  the  interest 
which  Cornelia  Kissam  got  from  Jonas  Kissam,  in  his  life 
time,  had  passed.  From  the  structure  of  the  Act,  to  say  that 
the  measure  of  the  tax  is  the  extent  of  the  interest  of  both 
joint  tenants  is,  in  effect,  to  say  that  a  tax  will  be  laid  on  the 
interest  of  Cornelia  in  respect  of  which  Jonas  had  in  his  life 
time  no  longer  either  title  or  control. 

"When  viewed  prospectively,  Congress  would  have  the 
power  to  tax  the  privilege  of  a  survivor  of  acquiring  the  entire 
5 


66  FEDERAL  ESTATE  TAX. 

Decisions  under  state  statutes — In  general. 


DECISIONS    UNDER    STATE    STATUTES 

Though  the  State  statutes  differ  from  the  federal 
act,  the  decisions  throw  some  light  upon  the  con- 
struction of  the  latter. 

§  67.  In  general. 

The  question  of  the  taxability  of  joint  interests 
usually  arises  in  the  States  under  statutes  which 
do  not  make  specific  reference  to  such  interests. 
One  of  the  main  questions  presented  is  whether  any 

property  by  the  instrumentality  of  a  joint  tenancy.  When 
viewed  retroactively,  it  must  be  assumed  that  Congress  would 
regard  as  the  original  owner  of  the  'part'  the  surviving  joint 
tenant  who  prior  to  the  passage  of  the  Act  was  vested  with 
or  possessed  of  legal  title,  whether  such  ownership  was  the 
result  of  a  gift  or  of  a  contribution  of  the  'part'  of  the  prop- 
erty embraced  within  the  joint  tenancy." 

In  this  case  the  husband  originally  owned  the  property  and 
transferred  it  to  a  third  person,  who  re-conveyed  it  to  husband 
and  wife  jointly.  The  decision  assumes  that  the  interest  thus 
created  was  a  joint  one,  rather  than  an  estate  by  the  entirety. 

It  has  been  held  in  New  York  that  a  statute  taxing  the 
entire  joint  interest  upon  the  death  of  a  joint  tenant  can,  as 
applied  to  an  interest  created  before  the  passage  of  the  taxing 
act,  operate  only  upon  the  one-half  interest  of  the  decedent, 
as  to  which  the  title  of  the  surviving  tenant  was  insecure  up 
to  the  moment  of  decedent's  death.  Matter  of  McKelway,  221 
N.  Y.  15;  116  N.  E.  Rep.  348. 

There  is  considerable  doubt  as  to  the  extent  of  the  relevancy 
of  this  decision,  or  similar  decisions  of  the  State  courts,  with 
reference  to  the  Federal  Act.  The  McKelway  case  is  one  of 
a  line  of  State  court  decisions  holding  that  an  inheritance  tax 
may  not  be  so  imposed  as  to  impair  vested  rights.     For  other 


GROSS  ESTATE.  67 


Decisions  under  state  statutes — In  general. 

interest  in  the  joint  property  passes  under  the  in- 
testate laws  upon  the  death  of  one  of  the  joint 
tenants,  so  as  to  bring  the  case  within  a  statute 
taxing  interests  so  passing.  The  authorities  appear 
to  be  unanimous  that  the  interest  of  the  surviving 
tenant  comes  to  him  under  the  instrument  creating 
the  tenancy,  not  under  the  intestate  laws,  and  is 
consequently  not  subject  to  tax  under  a  provision  of 
this  character.67 

decisions  of  the  same  sort  see  Matter  of  Pell,  171  N.  Y.  48,  63 
N.  E.  Rep.  789;  Hunt  v.  Wicht,  174  Cal.  205,  162  Pac.  Rep.  639. 

The  only  relevant  limitation  upon  the  power  of  Congress, 
however,  is  the  "due  process"  clause  of  the  Fifth  Amend- 
ment, which  does  not,  like  many  of  the  State  Constitutions, 
forbid  legislative  action  impairing  the  obligation  of  a  contract. 
Sinking  Fund  Cases,  99  U.  S.  700,  718;  Mitchell  v.  Clark,  110 
U.  S.  633,  643;  Evans-Snider-Buel  Co.  v.  McFadden,  105  Fed. 
Rep.  293,  297,  affd.  185  U.  S.  505. 

It  is  also  a  question  how  far  the  tax  upon  the  transfer  of 
the  decedent 's  net  estate  may  be  measured  with  reference  to 
property  not  itself  the  direct  subject  of  tax.  See  United  States 
v.  Perkins,  163  U.  S.  625,  629-630;  Plummer  v.  Coler,  178  U.  S. 
115;  Snyder  v.  Bettman,  190  U.  S.  249,  253-254;  Flint  v.  Stone 
Tracy  Co.,  220  U.  S.  108,  162-163;  Brushaber  v.  Union  Pacific 
R.  R.  Co.,  240  U.  S.  1,  20;  Maxwell  v.  Bugbee,  250  U.  S.  525, 
539. 

67.  Attorney  General  v.  Clark,  222  Mass.  291,  110  N.  E.  Rep. 
299;  Matter  of  Tilley,  166  App.  Div.  (N.  Y.)  240,  151  N.  Y. 
Supp.  79,  affd.  215  N.  Y.  702,  109  N.  E.  Rep.  1094;  Matter  of 
Thompson,  167  App.  Div.  356,  153  N.  Y.  Supp.  164,  affd.  217 
N.  Y.  609,  111  N.  Y.  Supp.  1101;  Matter  of  Dalsimer,  167  App. 
Div  365,  153  N.  Y.  Supp.  58,  affd.  217  N.  Y.  608,  111  N.  E. 
Rep.  1085. 


68  FEDERAL  ESTATE  TAX. 

Decisions  under  state  statutes — In  general. 

The  question,  however,  remains  whether,  as  an 
incident  of  the  creation  of  the  joint  tenancy,  the 
decedent  made  a  transfer  of  the  property,  or  an 
interest  therein,  intended  to  take  effect  at  his 
death.68  Here  there  appears  to  be  a  conflict  in  the 
decisions.  The  weight  of  authority  seems  to  be  that 
the  creation  by  the  decedent  of  a  joint  interest  in 
the  property  in  himself  and  another  does  not  con- 
stitute a  transfer  intended  to  take  effect  at  his 
death,  and  is  consequently  not  taxable.69  This  rule 
apparently  takes  no  account  of  whether  or  not  a 
valuable  consideration  was  paid  to  the  decedent  for 

68.  The  statutes  of  all  the  States  contain  provisions  taxing 
such  transfers. 

69.  Matter  of  Tilley,  166  App.  Div.  (N.  Y.)  240,  151  N.  Y. 
Supp.  79,  affd.  215  N.  Y.  702,  109  N.  E.  Rep.  1094  (deposit  of 
moneys  by  husband  to  joint  account  of  himself  and  wife;  not 
taxable  at  his  death) ;  Matter  of  Thompson,  167  App.  Div.  356, 
153  N.  Y.  Supp.  164,  affd.  217  N.  Y.  609,  111  N.  E.  Rep.  1101 
(moneys  deposited  by  husband  to  joint  account  of  himself  and 
wife,  bonds  and  mortgages  taken  by  husband  in  joint  names  of 
himself  and  wife,  and  mortgages  transferred  by  him  individually 
to  himself  and  herself  jointly;  not  taxable  at  his  death);  Mat- 
ter of  Dalsimer,  167  App.  Div.  365,  153  N.  Y.  Supp.  58,  affd. 
217  N.  Y.  608,  111  N.  E.  Rep.  1085  (bonds  owned  by  husband, 
re-registered  in  names  of  himself  and  wife  as  joint  tenants; 
not  taxable  at  his  death). 

The  reasoning  upon  which  this  conclusion  is  reached  is  as 
follows : 

"The  right  of  survivorship  vests  in  the  creation  of  the  joint 
tenancy,  and  the  only  question  determined  by  death  is  which 
shall  take  the  entire  estate.  Under  such  circumstances  it  is 
clear  that  there  is  no  succession  to  be  taxed,  for  it  was  not 


GROSS  ESTATE.  69 


Decisions  under  state  statutes — In  general. 

the  creation  of  the  joint  tenancy;  and  it  has  been 
expressly  held  that  this  fact  is  immaterial.70 

There  are  other  decisions,  however,  holding,  in 
substance,  that  insofar  as  the  decedent  confers 
upon  his  co-tenant  an  interest  in  the  property 
without  a  valuable  consideration  there  is  a  transfer 
intended  to  take  effect  at  the  decedent's  death, 
which  is  taxable  when  he  dies.71 

'made  in  contemplation  of  the  death  of  the  grantor,  vendor  or 
donor,  or  intended  to  take  effect  in  possession  or  enjoyment  at 
or  after  such  death.'  The  possession  is  given  upon  the  creation 
of  the  estate;  the  rights  are  absolutely  and  conclusively  fixed, 
and  the  only  question  which  is  contingent  is  which  of  two  or 
more  joint  tenants  shall  eventually  own  the  entire  estate.  But 
each  is  in  full  possession,  each  has  full  ownership  as  against 
all  the  world,  with  the  exception  of  the  equal  rights  of  the 
others,  and  the  transfer  which  becomes  fully  determined  at  the 
death  of  one  of  two  joint  owners,  relates  back  to  the  creation 
of  the  estate.  It  was  then  that  the  rights  vested,  and  the 
death  only  determines  which  shall  be  the  gainer  by  the  trans- 
action."   Matter  of  Tilley,  166  App.  Div.  (N.  Y.)  242-243. 

70.  Matter  of  Dalsimer,  167  App.  Div.  365,  367,  153  N.  Y. 
Supp.  58;  affd.  217  N.  Y.  608,  111  N.  E.  Rep.  1085;  Matter  of 
Graves,  52  Misc.  433,  103  N.  Y.  Supp.  571 ;  Matter  of  Stebbins, 
52  Misc.  438,  103  N.  Y.  Supp.  563. 

71.  Matter  of  Kline,  65  Misc.  446,  121  N.  Y.  Supp.  1090; 
Supp.  58,  affd.  217  N.  Y.  608,  111  N.  E.  Rep.  1085;  Matter  of 
Reed,  89  Misc.  632,  154  N.  Y.  Supp.  247;  In  re  Von  Bernuth's 
Estate,  143  N.  Y.  Supp.  672. 

Where  the  property  is  money  in  bank,  only  so  much  of  it  as 
the  decedent  contributed  is  taxed  at  his  death.  Matter  of 
Kline,  supra;  Matter  of  Durfee,  supra;  In  re  Rosenberg's 
Estate,  114  N.  Y.  Supp.  726. 


70  FEDERAL  ESTATE  TAX. 

Decisions  under  state  statutes — In  general. 

These  decisions  leave  it  at  least  doubtful  whether 
the  controlling  feature  of  taxability  is  the  cash 
contribution  of  the  decedent,  or  the  extent  of  his 
technical  legal  title.  The  federal  statute  apparently 
adopts  the  former  test,  and  the  Bureau  has  so  ruled. 

Where  the  statute  contains  specific  reference  to 
joint  interests,  questions  like  the  foregoing  would 
not  arise.  In  New  York  it  is  now  provided  in  the 
case  of  joint  estates  or  deposits,  or  estates  by  the 
entirety,  that  the  right  of  the  surviving  tenant 
"shall  be  deemed  a  transfer  taxable  *  *  *  in 
the  same  manner  as  though  the  whole  property  to 
which  such  transfer  relates  belonged  absolutely  to 
the  deceased  tenant  by  the  entirety,  joint  tenant  or 
joint  depositor  and  had  been  bequeathed  to  the  sur- 
viving tenant  by  the  entirety,  joint  tenant  or  joint 
tenants,  person  or  persons,  by  such  deceased 
tenant,"  etc.72 

72.  Tax  Law,  Cons.  Laws,  Chap.  60,  See.  220,  sub-div.  7; 
added  by  Laws  of  1915,  Chap.  664.  For  an  application  of  this 
statute  to  a  joint  interest  created  prior  to  its  passage,  see 
Matter  of  McKelway  (221  N.  Y.  15,  116  N.  E.  Rep.  348).  In 
this  case  it  was  held  that  only  one-half  of  the  property  was 
taxable.  This  result,  however,  was  reached  not  upon  a  con- 
struction of  the  statute,  but  upon  the  ground  of  a  constitutional 
limitation  upon  the  right  to  tax  the  interest  vested  throughout 
in  the  other  joint-tenant.  (See  221  N.  Y.,  p.  19.)  Where  the 
interest  was  created  after  the  passage  of  the  statute,  the  entire 
joint  interest  is  taxable.  Matter  of  Dolbeer,  226  N.  Y.  623; 
123  N.  E.  Rep.  381. 


GROSS  ESTATE.  71 


Tenancies    by    the    entirety — Appointed    property. 

§  68.  Tenancies  by  the  entirety. 

It  has  been  held  that  the  surviving  tenant  by  the 
entirety  does  not  take  any  interest  under  the  intes- 
tate laws,  and  is  consequently  not  taxable  under  a 
statutory  provision  relating  to  interests  passing 
thereunder.73 

(e)    APPOINTED  PROPERTY. 

§  69.  The  statute. 

Subdivision  (e)  of  Sec.  402  reads: 

"To    the    extent    of    any    property    passing 
under  a  general  power  of  appointment  exer- 
cised by  the  decedent   (1)  by  will,  or  (2)  by 
deed  executed  in  contemplation  of,  or  intended 
to  take  effect  in  possession  or  enjoyment  at  or 
after,  his  death,  except  in  case  of  a  bona  fide 
sale    for    a    fair    consideration    in    money    or 
money's  worth." 
There  is  here  an  express  provision  requiring  the 
inclusion  of  appointed  property  in  the  gross  estate 
where  the  power  of  appointment  is  general,  and  is 
exercised   by   will,    or   by   deed    of   the    character 

73.  Palmer  v.  Mansfield,  222  Mass.  263,  110  N.  E.  Rep.  283. 
See  also  Matter  of  Klatzl,  216  N.  Y.  83,  110  N.  E.  181.  In  the 
latter  case  three  judges  expressed  the  opinion  that  the  interest 
of  the  surviving  tenant  by  the  entirety  is  not  taxable.  This 
view  was  apparently  shared  by  three  other  judges,  who  ex- 
pressed an  opinion  in  favor  of  the  tax  upon  the  sole  ground 
that  the  estate  under  consideration  was  an  estate  in  common, 
not  by  the  entirety.  A  single  judge  expressed  the  opinion  that 
the  interest  of  a  surviving  tenant  by  the  entirety  is  taxable. 


72  FEDERAL  ESTATE  TAX. 

Appointed  property. 

described.  These  provisions  are  applicable 
wherever  the  decedent  died  after  February  24,  1919. 
The  Regulations  provide: 

"As  a  general  rule,  property  passing  under 
a  general  power  of  appointment  must  be  in- 
cluded in  the  gross  estate  of  the  person  exer- 
cising   the    power    (known    as    the    donee,    or 
appointor)    where   the   power   is   exercised  by 
will,  or  by  deed  executed  in  contemplation  of 
death,  or  intended  to  take  effect  at  or  after 
death.    This  general  rule  applies  wherever  the 
decedent  died  after  September  8,  1916,  although 
the  power  was  created  prior  to  that  date." 
(Art.  30.) 
A  tax  imposed  at  the  death  of  the  donee  of  a 
power  of  appointment  upon  the  passage  of  prop- 
erty effected  through  the  operation  of  the  power  is 
a  familiar  feature  in  the  inheritance  tax  statutes  of 
the  States.     Its  constitutionality  has  been  upheld 
although  the  instrument  creating  the   power  was 
executed  before  the  passage  of  the  statute  imposing 
a  tax  upon  the  transfer  effected  through  the  opera- 
tion of  the  power.74 

74.  Orr  v.  Gilman,  183  U.  S.  278;  Chanler  v.  Kelsey,  205 
U.  S.  466. 

This  is  the  established  rule  in  spite  of  the  doctrine,  expressly 
recognized  in  the  decisions,  that  the  property  is  deemed  to 
pass  under  the  instrument  creating  the  power,  in  the  same 
manner  as  though  the  instrument  exercising  the  power  had 
been  incorporated  therein. 


GROSS  ESTATE.  73 


Power  must  be  general. 


§  70.  Power  must  be  general. 

On  this  point  the  language  of  the  statute  is  clear. 

The  Regulations  provide: 

"Only  property  passing  under  a  general 
power  should  be  included.  A  general  power  is 
one  to  appoint  to  any  person  or  persons  in  the 
discretion  of  the  donee.  Where  the  donee  is 
required  to  appoint  to  a  specified  person  or 
class  of  persons,  the  property  should  not  be 
included  in  his  gross  estate.  Property  ap- 
pointed under  a  general  power  should  be  in- 
cluded in  the  estate  of  the  appointor,  although 
the  persons  to  whom  the  appointment  was  made 
would  have  taken  the  property  had  the  power 
not  been  exercised.  A  copy  of  the  instrument 
granting  the  power  should  be  filed  with  Form 
706  in  all  cases  in  order  that  the  Bureau  may 
determine  whether  the  power  is  general  or 
special."     (Art.  30.) 

§  71.  Powers  exercised  prior  to  February  24,  1919. 

Where  the  power  is  exercised  prior  to  February 
24,  1919,  and  the  case  is  consequently  governed  by 
the  Revenue  Act  of  1916,  the  question  of  taxability 
is  a  serious  one,  since  the  provision  as  to  appointed 
property  in  the  Revenue  Act  of  1918  is  not  found  in 
the  earlier  statute.  The  history  of  the  Bureau 
rulings  upon  this  subject  is  as  follows: 

On  April  7,  1917,  Treasury  Decision  2477  was 
promulgated.    It  reads  as  follows: 


74  FEDERAL  ESTATE  TAX. 

Powers  exercised  prior  to  February  24,  1919. 


"It  is  held  that  where  a  decedent  exercises 
a  general  power  of  appointment  as  donee  under 
the  will  of  a  prior  decedent  the  property  so 
passing  is  a  portion  of  the  gross  estate  of  the 
decedent  appointor.  See  Brandies  v.  Cochrane, 
112  U.  S.  344,  352;  Olney  v.  Balch,  154  Mass. 
318 ;  Clapp  v.  Ingraham,  126  Mass.  200 ;  Rogers 
v.  Hinton,  62  N.  C.  101;  Tompson  v.  Towne,  2 
Vern.  319;  Bainton  v.  Ward,  2  Atk.  172. 

"When  property  is  transferred  by  a  special 
or  limited  powder  of  appointment,  the  question 
of  taxability  will  depend  upon  the  terms  of  the 
instrument  by  wilich  the  donee  of  the  power — 
the  appointor — acts.     The  facts  in  every  such 
case  should  be  reported  fully  to  the  commis- 
sioner in  order  that  decision  as  to  tax  liability 
may  be  made. ' ' 
The  cases  here  cited  lay  down  the  rule,  originat- 
ing in  the  Chancery  Courts  of  England,  and  obtain- 
ing in  certain  of  the  States,  that  the  creditors  of  the 
donee   of   a   general   power   of   appointment   have 
rights  superior  to  those  of  the  persons  who  would 
otherwise  take  under  the  exercise  of  the  power. 

Treasury  Decision  2477  does  not  refer  to  the 
statute;  but  the  only  applicable  portion  of  the 
Revenue  Act  of  1916  is  Section  202  (a),  relating  to 
an  interest  of  the  decedent  at  the  time  of  his  death 
"which  after  his  death  is  subject  to  the  payment  of 
the  charges  against  his  estate  and  the  expenses  of 
its  administration  and  is  subject  to  distribution  as 


GROSS  ESTATE.  75 


Later  rulings. 


part  of  his  estate."  The  theory  of  the  Treasury 
Decision  evidently  is,  that  the  fact  that  the  creditors 
of  an  appointor  may  resort  to  the  appointed  prop- 
erty, is,  of  itself,  sufficient  to  bring  the  case  within 
the  statute,  whether  or  not  the  property  is  subject 
to  the  payment  of  administration  expenses,  or  to 
distribution  as  part  of  the  estate  of  the  appointor. 
That  is,  the  word  "and"  in  the  statute  receives  a 
disjunctive,  rather  than  a  conjunctive,  construc- 
tion.75 The  ruling  is  carried  into  the  Regulations 
of  May,  1917,  which  provide  that  "Property  passing 
under  a  general  power  of  appointment  is  to  be  in- 
cluded as  a  portion  of  the  gross  estate  of  a  decedent 
appointor."  76 

§  72.  Same — Later  rulings. 

Even,  however,  if  the  language  of  Section  202  (a) 
of  the  Revenue  Act  of  1916  be  construed  disjunc- 
tively, the  statute  would  not  embrace  a  case  in 
which,  under  the  local  law,  the  creditors  of  the 
donee  of  the  power  do  not  possess  rights  superior 
to  those  of  the  appointees;  to  a  case,  that  is,  in 
which  the  rule  laid  down  by  the  authorities  cited  in 
Treasury  Decision  2477  does  not  obtain  in  the  local 
jurisdiction.  In  such  a  case  the  property  would  not 
be  subject  to  the  payment  of  the  charges  against 

75.  While  the  word  may  doubtless  be  construed  disjunctively, 
in  order  to  effectuate  the  plain  meaning,  that  is  not  the  natural 
construction. 

76.  Regulations  No.  37,  Revised  May,  1917,  Art.  XI. 


76  FEDERAL  ESTATE  TAX. 

Later  rulings. 

the  estate  of  the  appointor,  or  the  expense  of  admin- 
istering his  estate;  nor  would  it  be  subject  to  dis- 
tribution as  part  of  his  estate.77 

These  principles  are  recognized  in  the  Regula- 
tions, which  provide: 

1 '  Where  the  decedent  died  between  September 
8,  1916,  and  February  25,  1919,  the  taxability 
of  the  transfer  depends  upon  whether  the  prop- 
erty was  subject  to  the  claims  of  the  creditors 
of  the  appointor,  in  preference  to  the  person 
or  persons  in  whose  favor  the  power  was  exer- 
cised. The  general  rule  is,  that  the  property  is 
so  subject;  and  it  should  consequently  be  in- 
cluded in  the  gross  estate  unless  this  rule  has 
been  abrogated  in  the  State  whose  laws  deter- 
mine the  nature  and  effect  of  the  transfer.  All 
such  transfers  should  be  disclosed  to  the 
Bureau  in  order  that  it  may  pass  upon  the 
question  of  taxability."     (Art.  31.) 

77.  There  is  certainly  no  principle  upon  which  the  property 
could  be  subject  to  the  administration  expenses  of  the  estate 
of  the  appointor;  nor  would  it  be  "subject  to  distribution" 
as  part  of  his  estate.  It  is  a  familiar  rule  that  the  appointed 
property  is  deemed  to  pass  under  the  instrument  creating  the 
power,  not  under  that  by  which  it  is  exercised.  This  rule  has 
been  applied  to  questions  arising  under  inheritance  tax  statutes. 
See  Emmons  v.  Shaw,  171  Mass.  410,  50  N.  E.  Rep.  1033;  In  re 
Harbeck,  161  N.  Y.  211,  55  N.  E.  Rep.  850 ;  Commonwealth  v. 
Williams,  13  Pa.  St.  29;  Winn  v.  Schenck,  33  Ky.  Law.  Rep. 
615,  110  S.  W.  Rep.  827. 


GROSS  ESTATE.  77 


Specific  cases — Court  decisions. 


§  73.  Same — Specific  cases. 

In  accordance  with  these  principles,  appointed 
property  is  excluded  from  the  gross  estate,  in  cases 
arising  under  the  Revenue  Act  of  1916,  in  New  York 
and  Maryland,  under  the  laws  of  which  the  rights  of 
the  appointee  are  superior  to  those  of  the  creditors 
of  the  appointor.78 

§  74.  Same — Court  decisions — Rule  in  Pennsyl- 
vania. 

The  Circuit  Court  of  Appeals  for  the  Third 
Circuit  has  held  that  under  the  laws  of  Pennsyl- 
vania the  donee  of  the  power  has  no  interest  in  the 
appointed  property  which  is  subject  to  his  debts  or 
to  distribution  as  part  of  his  estate,  and  conse- 
quently that  such  property  should  not  be  included  in 
the  gross  estate  of  the  donee — appointor  in  cases 
arising  under  the  Revenue  Act  of  1916. 79 

The  Bureau  has  yielded  to  the  authority  of  this 
decision,  stating  that  "it  is  accepted  by  the  Treas- 

78.  See  Cutting  v.  Cutting,  86  N.  Y.  522;  Balls  v.  Dampman, 
69  Md.  390.  As  to  the  rule  in  Pennsylvania  and  Illinois,  see 
infra,  pp.  77-9. 

79.  Lederer  v.  Pearce,  266  Fed.  Rep.  497,  affg.  262  Fed.  Rep. 
993. 

There  can  be  little  doubt  that  under  the  laws  of  Pennsyl- 
vania the  appointees  have  rights  superior  to  those  of  the 
creditors  of  the  appointor.  Commonwealth  v.  Duffield,  12  Pa. 
St.  277;  Commonwealth  v.  Williams,  13  Pa.  St.  29;  In  re 
Dunglison's  Estate,  201  Pa.  St.  592,  51  Atl.  Rep.  356;  In  re 
King's  Estate,  14  Wkly.  Notes  77;  In  re  Swaby's  Appeal,  14 
Wkly.  Notes  553. 


78  FEDERAL  ESTATE  TAX. 

Decisions  in  Illinois  and  Ohio. 

ury  Department  as  to  all  cases  arising  under  Title 
II  of  the  revenue  act  of  1916  in  which  the  construc- 
tion and  effect  of  the  power  of  appointment  and 
the  rights  of  the  purposes  thereunder  are  governed 
by  the  laws  of  Pennsylvania;"  and  that  "in  such 
cases  the  appointed  property  will  not  be  included 
in  the  gross  estate  of  the  decedent  exercising  the 
power."793 

§  75.  Same — Decisions  in  Illinois  and  Ohio. 

The  Court  of  Claims  has  held,  as  a  general  propo- 
sition, in  a  case  arising  in  Illinois,  that  appointed 
property  is  not  taxable  under  the  Revenue  Act  of 
1916.80  A  similar  decision  has  been  made  in  Ohio, 
holding  that  property  passing  under  a  general 
power  of  appointment  exercised  by  a  resident  of 
that  State  should  not  be  included  in  his  gross 
estate.803 

79a.  Treasury  Decision  3088  (Oct.  3,  1920),  amending  Treas- 
ury Decision  2477.    See  pp.  351-2. 

80.  Field  v.  United  States;  Court  of  Claims,  June  7,  1920. 
The  gist  of  the  reasoning  is  as  follows : 

"It  is  a  cardinal  rule  that  statutes  imposing  taxes  upon  the 
citizen  must  be  construed  in  favor  of  the  taxpayer.  The  intent 
of  Congress  to  impose  a  tax  upon  any  specific  property  or 
estate  should  be  expressed  in  clear  and  unambiguous  language. 
*  *  *  In  the  Act  of  1916  there  is  no  provision  for  taxing 
property  passing  under  a  general  power  of  appointment  exer- 
cised by  a  decedent  by  will,  nor  is  it  possible  by  a  fair  or 
reasonable  construction  to  include  appointed  property  in  the 
property  mentioned  in  paragraph  (a)  of  Section  202  of  the 
Act." 

80a.  Ebersole  v.  McGrath,  U.  S.  Dist.  Court,  Southern  Dist. 


GROSS  ESTATE.  79 


Insurance. 


If  the  Bureau  yields  to  the  authority  of  these  de- 
cisions, there  will  be  no  further  effort  to  tax  ap- 
pointed property  where  the  decedent  died  prior  to 
February  25,  1919.  Upon  the  reasoning  of  these  de- 
cisions, it  is  immaterial  whether  the  State  law  which 
governs  the  case  does  or  does  not  recognize  rights 
of  the  creditors  of  the  donee  of  the  power  superior 
to  those  of  the  appointee. 

(f)    INSURANCE. 

§  76.  The  statute. 

Subdivision  (f)  of  Section  402  reads: 

"To  the  extent  of  the  amount  receivable  by 
the  executor  as  insurance  under  policies  taken 
out  by  the  decedent  upon  his  own  life;  and  to 
the  extent  of  the  excess  over  $40,000  of  the 
amount  receivable  by  all  other  beneficiaries  as 
insurance  under  policies  taken  out  by  the  dece- 
dent upon  his  own  life." 
The  Regulations  provide: 

"The  statute  provides  for  the  inclusion  in 

of  Ohio,  Peek,  J.;  not  yet  reported.  The  elaborate  opinion  in 
this  case  holds,  in  substance,  that,  although  such  property  is 
assets  of  the  decedent  for  certain  purposes,  it  will  not  be  held 
to  be  a  ''part"  of  his  estate  within  the  meaning  of  a  taxing 
statute  which  does  not  expressly  so  specify.  It  is  also  held 
that  there  is  no  "transfer"  of  the  property,  within  the  mean- 
ing of  the  provision  as  to  transfers  in  the  decedent's  lifetime. 
The  court  refers  to  the  decision  in  Lederer  v.  Pearce  (supra), 
but  holds  that  it  is  not  directly  in  point,  since  the  laws  of  Ohio 
do  not,  like  those  of  Pennsylvania,  repudiate  the  rights  of  the 
creditors  of  the  appointor. 


80  FEDERAL  ESTATE  TAX. 

Payment  of  premiums. 

the  gross  estate  of  certain  forms  of  insurance 
taken  out  by  the  decedent  upon  his  own  life. 
Two  kinds  of  insurance  are  taxable:  (a)  all 
insurance  payable  to  the  estate;  (b)  insurance 
payable  to  individual  beneficiaries  to  the  extent 
that  it  exceeds  $40,000.  The  term  'insurance' 
refers  to  life  insurance  of  every  description, 
including  death  benefits  paid  by  fraternal 
beneficial  societies,  operating  under  the  lodge 
system."    (Art.  32. )81 

§  77.  Payment  of  premiums. 
The  Regulations  provide: 

"  Insurance  is  deemed  to  be  taken  out  by  the 
decedent  in  all  cases  where  he  pays  the 
premiums,  either  directly  or  indirectly,  whether 
or  not  he  makes  the  application.  On  the  other 
hand,  the  insurance  should  not  be  included  in 
the  gross  estate,  even  though  the  application  is 
made  by  the  decedent,  where  the  premiums  are 
actually  paid  by  some  other  person  or  corpora- 
tion, and  not  out  of  funds  belonging  to,  or 
advanced  by,  the  decedent.  Where  the  decedent 
takes  out  insurance  in  favor  of  another  person 
or  corporation,  as  collateral  security  for  a  loan 
or  other  accommodation,  and  the  decedent, 
either  directly  or  indirectly,  pays  the  premiums 

81.  The  provision  as  to  insurance  is  not  contained  in  the 
earlier  statutes.  Insurance  payable  to  the  estate,  however, 
was  included  in  the  gross  estate  under  the  Revenue  Act  of 
1916.     The  Regulations  of   May,   1917,  provide:     "Insurance 


GROSS  ESTATE.  81 


Insurance  in  favor  of  the  estate. 


thereon,-  the  insurance  must  be  considered  in 
determining  whether  there  is  an  excess  over 
$40,000.  Where  the  decedent  assigns  a  policy, 
and  retains  no  interest  therein,  and  thereafter 
pays  no  part  of  the  premiums,  the  insurance 
will  not  be  considered  in  determining  whether 
there  is  such  a  taxable  excess."    (Art.  32.) 

§  78.  Insurance  in  favor  of  the  estate. 
The  Regulations  provide: 

"The  provision  requiring  the  inclusion  in  the 
gross  estate  of  all  insurance  receivable  by  the 
executor,  without  any  deduction,  applies  to 
policies  made  payable  to  the  decedent's  estate 
or  his  executor  or  administrator,  and  all  in- 
surance, regardless  of  the  manner  of  execution, 
which  is  in  fact  receivable  by  the  estate,  or 
which  must  be  used  to  pay  charges  against  the 
estate  or  the  expenses  of  administration.  This 
provision  includes  insurance  taken  out  to  pro- 
vide funds  to  meet  the  estate  tax,  state  inheri- 
tance taxes,  or  any  other  legal  charge  upon  the 
estate.     The   manner   in   which   the   policy   is 

passing  to  the  estate  is  to  be  returned  on  Form  706.  If  the 
contract  of  insurance  has  named  a  definite  beneficiary  and 
the  insurance  is  paid  directly  to  such  beneficiary  it  is  not  a 
part  of  the  gross  estate."  Regulations  No.  37,  Revised,  May, 
1917,  Art.  X. 

The  ruling   including   insurance   payable   to   the   estate   was 
even  applied  where,  under  the  local  law,  the  insurance  was  not 
subject  to  the  payment  of  the  decedent's  debt9. 
6 


82  FEDERAL  ESTATE  TAX. 

Rule  under  Revenue  Act  of  1916. 

drawn  is  immaterial  so  long  as  there  is  an 
obligation,  legally  binding  upon  the  beneficiary, 
to  use  the  proceeds  in  payment  of  the  charge." 
(Art.  33.) 

§  79.  Same — Rule  under  Revenue  Act  of  1916. 

The  Eevenue  Act  of  1916  did  not,  like  the  present 
statute,  contain  an  express  provision  for  the  inclu- 
sion of  insurance  payable  to  the  estate.  But  it  was 
nevertheless  ruled  that,  "Insurance  passing  to  the 
estate  is  to  be  returned  on  Form  706.  "82  It  was 
further  provided,  however,  that, 

"If  the  contract  of  insurance  has  named  a 

definite  beneficiary  and  the  insurance  is  paid 

directly  to  such  beneficiary  it  is  not  a  part  of 

the  gross  estate."83 

It  was  held,  however,  that  individual  insurance 

would  be  taxable  if  the  transfer  to  the  beneficiary 

was  made  in  contemplation  of  death.     The  former 

Regulations  provided: 

"If  insurance  which  by  the  terms  of  the  con- 
tract is  payable  to  the  executor,  is  transferred 
to  another  beneficiary  or  trustees  for  another 
beneficiary,  and  the  transfer  is  made  in  con- 
templation of  death,  the  value  of  such  insur- 
ance is  taxable  under  the  provisions  of  para- 
graph (b),  Section  202.  "84 

82.  Regulations  No.  37,  Revised,  May,  1917,  Art.  X. 

83.  Regulations  No.  37,  Revised,  May,  1917,  Art.  X. 

84.  Regulations  No.  37,  Revised,  May,  1917,  Art.  X. 


GROSS  ESTATE.  83 


Individual  insurance — What  is  individual  insurance? 

§  80.  Individual  insurance. 

The  Regulations  provide: 

"The  estate  is  entitled  to  only  one  exemption 
of  $40,000  upon  insurance  payable  to  bene- 
ficiaries other  than  the  executor.  For  example, 
if  the  decedent  left  life  insurance  payable  to 
three  persons  in  amounts  of  $10,000,  $40,000, 
and  $50,000  (total,  $100,000),  the  amount  of 
$60,000  should  be  returned  for  taxation,  which 
is  the  excess  of  the  sum  of  the  three  policies 
over  the  exempted  amount.  The  word  'bene- 
ficiary,' as  used  in  reference  to  the  $40,000 
exemption,  means  a  person  entitled  to  the 
actual  enjoyment  of  the  insurance  money." 
(Art.  34.) 

§  81.  What  is  individual  insurance? 

Certain  policies  considered  have  presented  un- 
usual features.  In  one  case  the  decedent  deposited 
$100,000  with  an  insurance  company,  under  a  con- 
tract to  pay  him  an  annuity  of  $10,000,  and,  in  ease 
he  should  die  before  the  annuity  payments  amounted 
to  $100,000,  to  pay  the  excess  to  a  designated  per- 
son. It  was  ruled  that  the  payment  thus  made  to 
such  beneficiary  constituted  individual  insurance; 
and  that,  if  in  excess  of  $40,000,  such  excess  should 
be  included  in  the  gross  estate.85 

In  another  case  the  decedent  took  out  a  policy  for 
$100,000,  under  an  agreement  that  at  his  death  the 

85.  The  case,  of  course,  arose  under  the  Revenue  Act  of 
1918,  wherein  individual  insurance  is  taxable  in  certain  cases. 


84  FEDERAL  ESTATE  TAX. 

Reservation  by  insured  of  right  to  change  beneficiary. 

income  should  be  paid  to  his  widow,  and  at  her 
death  to  his  son,  the  principal,  at  the  death  of  the 
son,  to  be  paid  to  his  estate.  It  was  ruled  that  the 
whole  policy  constituted  individual  insurance,  as 
much  as  though  the  entire  sum  had  been  payable  to 
a  specified  individual  at  the  decedent's  death;  and 
consequently  that  $60,000,  the  excess  over  $40,000, 
should  be  included  in  the  gross  estate.88 

Where  a  policy  is  payable  to  the  decedent's 
executors,  administrators  or  assigns,  or  to  such 
beneficiary  as  he  may  designate,  and  contempor- 
aneously with  the  execution  of  the  policy  the  insurer 
appoints  the  insurance  company  as  trustee  to  re- 
ceive the  proceeds  and  apply  them  to  the  use  of 
designated  persons,  and  the  company  accepts  the 
trust  and  agrees  to  apply  the  money  in  the  manner 
specified,  the  insurance  is  held  to  be  individual  in- 
surance, not  insurance  payable  to  the  estate,  and 
consequently  not  taxable  under  the  Revenue  Act  of 
1916. 

§  82.  Reservation  by  insured  of  right  to  change 
beneficiary. 
Where  the  insured  reserves  the  absolute  right  to 
change  the  beneficiary,  it  has  been  held  that  the 
policy  constitutes  part  of  his  estate,  and  should  con- 
sequently be  included  in  the  gross  estate.87 

86.  The  case  arose  under  the  Revenue  Act  of  1918. 

87.  Gaither  v.  Miles,  U.  S.  Dist.  Ct.,  Dist.  of  Md.,  Rose,  D.  J. 
For  this  proposition  the  court  cites  Cohen  v.  Samuels  (245  U.  S. 
50),  holding  that  a  policy  of  this  character  comes  within  the 


GROSS  ESTATE.  85 


War   risk    insurance — Effective   date   of   insurance    provisions. 

§  83.  War  risk  insurance — No  exemption  of. 

The  question  has  arisen  as  to  whether  policies 
issued  by  the  Bureau  of  War  Risk  Insurance  should 
be  included  in  the  gross  estate,  in  view  of  the  statu- 
tory provision  that  such  insurance  "shall  be  exempt 
from  all  taxation."88  It  is  ruled,  however,  that  the 
exemption  is  merely  from  property  taxes,  and  does 
not  include  a  tax  upon  the  transfer  of  the  net  estate 
at  death,  measured  with  reference  to  such  prop- 
erty.89 

§  84.  Effective  date  of  insurance  provisions. 
The  Regulations  provide: 

"Insurance  receivable  by  the  executor  must 
be  included  in  the  gross  estate  of  all  decedents 
who  died  after  September  8,  1916.  Insurance 
payable  to  beneficiaries  other  than  the  executor, 
however,  need  not  be  included  in  the  gross 
estate  of  decedents  who  died  before  February 
25,  1919,  the  effective  date  of  the  Revenue  Act 
of  1918,   unless   the   insurance   was   originally 

terms  of  Sec.  70-a  of  the  Bankruptcy  Act.  The  latter  contains 
special  references  to  powers  which  the  bankrupt  may  exercise 
for  his  own  benefit,  and  to  insurance  policies  having  a  cash 
surrender  value.  The  decision  in  Gaither  v.  Miles  is  not  based 
upon  the  express  provisions  relating  to  insurance  in  the  present 
statute.     The  case  was  decided  under  the  Revenue  Act  of  1916. 

88.  U.  S.  Compiled  Statutes,  Supplement,  1919,  Vol.  1,  Sec. 
514nnn%. 

89.  As  to  which  see  Plummer  v.  Coler,  178  U.  S.  115;  Orr  v. 
Gilman,  183  U.  S.  278;  Strode  v.  Commonwealth,  52  Pa.  St. 
181;  Commonwealth  v.  Herman,  16  Weekly  Notes  of  Cases 
(Pa.)  210;  Lovitt  v.  Attorney  General,  33  Can.  Sup.  Ct.  350. 


83  FEDERAL  ESTATE  TAX. 

Nonresident  estates — Right  to  transfer  stock. 

payable  to  the  estate,  and  was  transferred  by 
the  decedent  to  specific  beneficiaries  in  con- 
templation of  death."     (Art.  35.) 

NONRESIDENT    ESTATES 

§  85.  Local  situs  of  property — Stock  and  insurance. 
In  the  case  of  the  estates  of  nonresidents  it  is 
necessary,  in  order  that  property  be  included  in  the 
gross  estate,  that  it  be  "situated  in  the  United 
States."  (Sec.  403. )90  Thus,  in  addition  to  the 
other  specified  requirements,  the  situs  of  the  prop- 
erty must  be  kept  in  mind.  The  principal  questions 
arise  with  reference  to  personal  property  and  choses 
in  action.  The  Regulations  provide :  ' '  The  situs  of 
property,  both  real  and  personal,  for  the  purpose  of 
the  tax  is  its  actual  situs."    (Art.  60.) 

The  statute  contains  the  following  express  pro- 
vision with  reference  to  domestic  stock  and  insur- 
ance: 

"For  the  purpose  of  this  title  stock  in  a 
domestic  corporation  owned  and  held  by  a  non- 
resident decedent,  and  the  amount  receivable  as 
insurance  upon  the  life  of  a  nonresident  dece- 
dent where  the  insurer  is  a  domestic  corpora- 
tion, shall  be  deemed  property  within  the 
United  States."    (Section  403.) 

§  86.  Right  of  transfer  agent  to  transfer  stock. 

The  subject  of  the  transfer  of  stock  belonging  to 
the  estate  of  a  nonresident  decedent  has  caused  con- 

90.  The  statute  provides  that  where  the  decedent  has  made 
in  his  lifetime  a  taxable  transfer  of  property,  such  property 


GROSS  ESTATE.  87 


Right  of  transfer  agent  to  transfer  stock. 

siderable  trouble.  The  present  Regulations  contain 
nothing  on  the  point;  but  it  has  been  the  subject  of 
previous  rulings. 

Treasury  Decision  2421  (Dec.  22,  1916)  provides 
that  "tax  payment  will  be  required  of  the  repre- 
sentatives01 out  of  the  property  in  their  charge  if 
payment  has  not  been  made  before  the  due  date  by 
the  executor  or  administrator."  Treasury  Decision 
2454  (Feb.  28,  1917)  provides:  "The  transfer  shall 
not  be  effected  or  the  stock  or  bonds  released  to  the 
foreign  administrator  or  executor  or  the  succeeding 
beneficiary  until  the  transfer  agent  shall  have  been 
fully  assured  either  that  the  tax  due  has  been  paid 
or  that  ancillary  letters  have  been  taken  out  in  this 
country  or  provision  otherwise  made  for  the  satis- 
faction of  the  tax  lien  against  the  estate." 

These  rulings,  however,  were  subsequently  modi- 
fied. Treasury  Decision  2490  (May  14,  1917)  pro- 
vides that  the  transfer  agent  shall  give  the  30-day 
notice92  in  all  cases  where  the  decedent  is  a  non- 
resident, and  a  local  executor  has  not  been  ap- 
pointed; but  adds:  "If  this  notice  be  filed  as 
required  either  within  30  days  from  death  or  imme- 
diately upon  receipt  of  the  order  for  transfer  or 

"shall  be  deemed  to  be  situated  in  the  United  States,  if  so 
situated  either  at  the  time  of  the  transfer  or  the  creation  of 
the  trust,  or  at  the  time  of  the  decedent's  death."     (Sec.  403.) 

91.  Previous  language  shows  that  this  term  was  intended  to 
include  transfer  agents. 

92.  Now  a  60-day  notice.  The  ruling  was  made  under  the 
Revenue  Act  of  1916. 


88  FEDERAL  ESTATE  TAX. 

Specific  cases  of  personal  property. 

payment,  the  transfer  or  payment  need  not  be  post- 
poned."93 It  is  added,  however,  that,  if  the  tax  is 
not  paid  when  due,  proceedings  will  be  brought94 
"for  the  sale  of  the  property  and  the  satisfaction  of 
the  tax." 

The  revision  of  1921,  however,  renews  the  orig- 
inal policy  of  forbidding  the  transfer  of  stock  until 
the  tax  has  been  either  paid  or  secured,  and  con- 
tains detailed  provisions  for  the  ascertainment  of 
the  tax,  and  the  payment  thereof  or  the  giving  of 
security  therefor.95 

§  87.  Same — Specific  cases  of  personal  property. 

The  Regulations  provide: 

"Bonds  actually  situated  in  the  United 
States,  moneys  on  deposit  with  domestic  banks 
and  moneys  due  on  open  accounts  by  domestic 
debtors  constitute  property  subject  to  tax." 
(Art.  60. )96 

93.  A  subsequent  Treasury  Decision  (2708,  April  25,  1918), 
provides  another  method  with  reference  to  the  transfer  of 
stock.  It  is  somewhat  complicated  and  has  been  used  very 
little. 

94.  Under  Sec.  208  of  the  Revenue  Act  of  1916;  Sec.  408  of 
the  present  statute. 

95.  See   Article  75- A    (infra,  p.       ). 

Similar  problems  have  arisen  with  reference  to  the  payment 
of  insurance;  and  this  subject  also  is  covered  by  a  new  provi- 
sion, preventing  payment  to  anyone  other  than  a  domestic 
executor  without  a  bond  or  deposit  to  secure  the  tax  (see  infra, 

p.         )• 

96.  There  are  numerous  authorities  in  both  the  federal  and 


GROSS  ESTATE.  89 


Property  used  in  British  War  Loan. 


§  88.  Same — Property  used  in  British  War  Loan. 

During  the  late  war  the  British  Government 
adopted  a  policy  of  requesting  its  citizens  to  make 
a  deposit  of  securities,  which  it  then  used  as  col- 
lateral for  loans.  In  this  way  much  property, 
formerly  owned  by  British  citizens,  was  sent  to  this 
country,  and  was  found  here  at  the  death  of  the 
owner.  The  Bureau  has  ruled  that  the  ownership 
of  this  property  continued  in  the  depositor,  and  that 
the  estate  is  consequently  subject  to  tax  with  refer- 
ence to  such  property  when  situated  in  this  country 
at  the  time  of  the  death.  This  ruling  subjects  to  tax 
the  transfer  of  stock  of  domestic  corporations 
owned  by  British  citizens,  deposited  wyith  the  British 
Treasury,  transferred  to  this  country  to  be 
hypothecated,  and  found  here  at  the  death  of  the 
owner.97 

A  different  ruling,  however,  has  been  made  with 
reference  to  bonds.     Their  situs  in  this  country  is 

state  courts  supporting  these  rulings.  See  Blaekstone  v. 
Miller,  188  U.  S.  189;  Liverpool  &  London  &  Globe  Ins.  Co. 
v.  Board  of  Assessors,  221  U.  S.  346;  People  v.  Griffith,  245 
111.  532,  92  N.  E.  Rep.  313;  State  v.  Dalrymple,  70  Md.  294, 
17  Atl.  Rep.  82;  Callahan  v.  Woodbridge,  171  Mass.  595,  51 
N.  E.  Rep.  176;  In  re  Romaine's  Estate,  127  N.  Y.  80,  27  N.  E. 
Rep.  759;  In  re  Whiting's  Estate,  150  N.  Y.  27,  44  N.  E.  Rep. 
715;  In  re  Houdayer's  Estate,  150  N.  Y.  37,  44  N.  E.  Rep.  718; 
In  re  Daly's  Estate,  100  App.  Div.  (N.  Y.)  373,  91  N.  Y.  Supp. 
858,  affd.  182  N.  Y.  524,  74  N.  E.  Rep.  1116;  Alvany  v.  Powell, 
55  N.  C.  51. 

97.  Treasury  Decision  2772,  Nov.  8,  1918.  The  securities  in 
such  cases  are  ordinarily  included  at  their  full  value,  although 


90  FEDERAL  ESTATE  TAX. 

Property  used  in  British  War  Loan. 

not  fixed,  like  that  of  stock  in  domestic  corporations, 
but  depends  upon  the  actual  presence  of  the  prop- 
erty. While  bonds  sent  to  this  country  by  the 
British  Government  under  the  circumstances  speci- 
fied, and  remaining  here,  have  an  actual  location  in 
the  United  States  at  the  date  of  the  death,  it  is 
nevertheless  ruled  that  they  have  not  such  a  situs 
as  to  subject  them  to  the  estate  tax.  The  British 
Government  does  not  act  as  the  agent  of  the  owner, 
but  in  its  governmental  capacity.  The  owner  never 
placed  the  property  within  the  jurisdiction  of  this 
country,  or  sought  the  protection  of  its  laws.  A 
location  obtained  in  this  way,  with  the  bare  consent 
of  the  owner,  but  through  no  action  of  his  or  any 
agent  of  his,  is  held  not  to  satisfy  the  requirements 
of  the  statute;  and  it  is  accordingly  ruled  that 
bonds,  whether  of  domestic  or  foreign  corporations, 
deposited  with  the  British  Government  and  sent 
here  to  be  hypothecated,  form  no  part  of  the  gross 
estate  of  the  nonresident  owner.  And  this  ruling 
has  been  extended  to  cases  in  which  securities  were 
originally  sent  to  this  country  by  the  owner  to  par- 
ticipate in  a  reorganization,  and  the  substituted 
securities  were  detained  in  this  country  by  the 
British  Government  and  here  hypothecated,  for 
which  reason  alone  they  were  found  in  the  United 
States  at  the  death  of  the  owner. 

the  British  Government,  in  pursuance  of  powers  granted  to  it, 
pledged  them  for  loans — the  reason  being  that  the  Government 
agrees  to  restore  the  securities  at  the  termination  of  the  loan, 
and  that  its  agreement  gives  full  value  to  the  property. 


GROSS  ESTATE.  91 


Foreign  checks — Insurance. 


§  89.  Foreign  checks. 

The  case  has  been  presented  of  checks  purchased 
by  a  nonresident  decedent,  drawn  by  foreign  banks 
upon  banks  in  this  country,  but  not  presented  for 
certification  or  payment  until  after  the  death  of  the 
decedent.  Since  the  mere  drawing  of  a  check,  prior 
to  certification  or  payment,  does  not  result  in  an 
equitable  assignment  of  the  money  to  the  holder, 
it  is  ruled  that  the  money  represented  by  the  checks 
in  such  a  case  has  no  situs  in  this  country  at  the 
time  of  the  death,  and  that  nothing  should  be  in- 
cluded in  the  gross  estate  by  reason  thereof. 

§  90.  Insurance. 

The  statute  requires  the  inclusion  in  the  gross 
estate  of  ' '  the  amount  receivable  as  insurance  upon 
the  life  of  a  nonresident  decedent  where  the  insurer 
is  a  domestic  corporation."  (Sec.  403.)  The  Regu- 
lations provide: 

''Where  insurance  is  payable  to  the  estate, 
all  insurance  in  demestic  companies  should  be 
included  in  the  gross  estate.  Where  insurance 
is  payable  to  individuals  other  than  the  execu- 
tor, there  should  be  included  in  the  gross  estate 
only  the  excess  of  domestic  insurance  over  the 
sum  of  $40,000.  Foreign  insurance  is  not  con- 
sidered. 

"Example:  The  testator  leaves  $30,000  of  in- 
surance in  domestic  companies  and  $30,000  of 
insurance  in  foreign  companies,  payable  in  each 


92  FEDERAL  ESTATE  TAX. 

Policies  issued  in  foreign  country. 

case  to  individual  beneficiaries.  As  the  domes- 
tic insurance  does  not  exceed  $40,000,  there  is 
nothing  to  be  included  in  the  gross  estate. 

" Example:  The  testator  leaves  $50,000  of  in- 
surance in  domestic  companies  and  $50,000  of 
insurance  in  foreign  companies,  payable  in  each 
case  to  individual  beneficiaries.  There  should 
be  included  in  the  gross  estate  $10,000  being  the 
excess  of  the  domestic  insurance  over  $40,000." 
(Art.  60.) 

§  91.  Policies  issued  in  foreign  country. 

The  statute  provides  for  the  inclusion,  without  ex- 
ception, of  all  insurance  taken  out  with  domestic 
companies.  It  is  accordingly  ruled  that  such  insur- 
ance must  be  included  in  the  gross  estate,  although 
the  policy  was  issued  in  a  foreign  country  to  a  non- 
resident, and  provision  was  made  for  its  payment  out 
of  funds  kept  on  deposit  in  such  foreign  country,  as 
required  by  its  laws.98 

98.  The  constitutional  power  of  Congress  to  tax  the  transfer 
of  such  insurance  may,  perhaps,  be  a  serious  question.  It  has, 
however,  plainly  attempted  to  do  so;  and  the  Bureau  seldom, 
if  ever,  permits  its  enforcement  of  the  statute  to  be  affected  by 
constitutional  questions  prior  to  the  decision  thereof  by  the 
courts. 

In  the  absence  of  explicit  language  in  the  statute,  it  seems 
clear  that  insurance  of  this  character  would  be  held  not  sub- 
ject to  tax  in  the  jurisdiction  in  which  the  company  was 
chartered.  See  Matter  of  Gordon,  186  N.  Y.  471;  79  N.  E.  Rep. 
722. 


CHAPTER  III. 
VALUATION  OF  PROPERTY. 

§  92.  Time  for  determining-  value. 

The  statute  provides  explicitly  that  the  value  of 
the  property  included  in  the  gross  estate  is  its 
1 'value  at  the  time  of  his  (the  decedent's)  death." 
(Sec.  402.)  This  is  the  general  rule.  The  Regula- 
tions provide: 

"The  value  at  which  property  included  in  the 
gross  estate  is  to  be  returned  for  tax  purposes 
is  the  value  at  the  time  of  the  decedent's  death. 
Neither  depreciation  nor  appreciation  in  value 
subsequent  to  the  date  of  death  is  considered." 
(Art.14.)1 

§  93.  Market  or  sale  value. 
The  Regulations  provide: 

"The  value  to  be  ascertained  is  the  market, 
or  sale,  value  of  the  property.  The  highest 
price  obtainable  for  the  property  within  a  rea- 
sonable period  of  the  decedent's  death  is  the 
value  to  be  included."     (Art.  14.) 

1.  This  ruling  was  anticipated  in  Treasury  Decision  2406 
(Dec.  2,  1916),  which  provided  that  "the  gross  estate  of  a 
decedent  must  be  based  upon  the  value  of  the  property  at  the 
time  of  decedent's  death,  and  income  earned  after  death  and 
appreciation  in  values  during  administration  shall  not  be  re- 
turned for  estate  tax." 

[93] 


94  FEDERAL  ESTATE  TAX. 

Tests  of  sales — Real  estate. 

§  94.  Tests  of  sales. 

The.  Regulations  provide : 

"A  sale  of  the  property,  however,  in  order  to 
be  accepted  as  the  criterion  of  value,  must  be 
made  in  such  manner  as  to  insure  the  best  price 
obtainable  under  existing  circumstances.  This 
requires  (a)  that  the  sale  be  made  as  a  matter 
of  business,  and  not  merely  in  order  to  estab- 
lish value;  (b)  that  it  be  made  in  absolute  good 
faith,  with  a  view  to  realizing  as  high  a  price 
as  possible;  and  (c)  that  reasonable  care  and 
skill  be  exercised  to  obtain  such  price.  If  one 
method  brings  better  results  than  another,  the 
better  method  must  be  employed. 

"For  example,  if  individual  sales  of  property 
are  better  adapted  to  procure  a  good  price  than 
auction  sales,  the  price  obtained  at  an  auction 
sale  will  be  accepted  only  after  reasonable  effort 
to  find  individual  purchasers  has  been  made." 
(Art.  14.) 

§  95.  Real  estate. 

The  Regulations  provide: 

"Where  real  property  has  been  sold,  the 
amount  received  will  be  taken  as  its  value  pro- 
vided the  sale  was  made  within  a  reasonable 
period  of  the  decedent's  death,  and  in  such  man- 
ner as  to  insure  the  highest  possible  price. 
Where  no  sale  has  been  made,  the  criterion  of 
value  is  the  best  price  which  could  have  been  ob- 
tained within  a  reasonable  period  of  the  deced- 
ent's death."    (Art.  15,  par.  [1]). 


VALUATION  OF  PROPERTY.  95 

Auction  sales — Assessed  valuation — Stocks  and  bonds. 

§  96.  Same — Auction  sales. 
The  Regulations  provide: 

"The  amount  brought  at  an  auction  sale 
should  be  considered,  but  will  be  accepted  only 
if  it  appears  that  there  was  no  available  method 
of  obtaining  a  higher  price."  (Art.  15,  par. 
[1]). 

§  97.  Same — Assessed  valuation. 
The  Regulations  provide: 

"The  assessed  valuation  of  the  property 
should  be  considered,  but  is  not  conclusive." 
(Art.  15,  par.  [1]). 

§  98.  Stocks  and  bonds — When  listed. 
The  Regulations  provide: 

"The  value  of  stocks  and  bonds  listed  upon  a 
stock  exchange  should  be  obtained  by  taking 
the  mean  between  the  highest  and  the  lowest 
sale  price  upon  the  day  of  death,2  provided  the 
sales  were  made  in  the  regular  course  of  busi- 
ness, and  not  for  the  special  purpose  of  estab- 
lishing value.  If  there  were  no  sales  upon  the 
date  of  death,  the  price  nearest  to  that  date,  and 
within  a  reasonable  period  thereof,  either  before 

2.  Before  the  promulgation  of  the  present  Regulations 
(August  8,  1919)  the  rule  obtained  of  including  listed  stocks 
at  the  highest  market  quotation  on  the  date  of  the  death.  It 
would  be  difficult  to  assign  a  reason  why  the  highest  figure  should 
be  taken  rather  than  the  lowest.  The  present  rule  seems  the 
most  equitable. 


96  FEDERAL  ESTATE  TAX. 

Unlisted  securities — Stock  of  close  corporations. 

or  after  death,  should  be  taken.  Such  sale  price 
obtains  irrespective  of  the  number  of  shares 
held  by  the  estate.3  If  the  security  was  listed 
upon  more  than  one  exchange,  the  records  of 
the  exchange  where  the  security  is  principally 
dealt  in  should  be  employed.  If  the  decedent 
died  on  Sunday  or  a  legal  holiday,  the  business 
of  the  previous  day  will  govern."  (Art.  15, 
par.  [2]). 

§  99.  Same — Unlisted  securities. 
The  Regulations  provide: 

"If  the  stock  is  not  listed  upon  an  exchange, 
but  is  dealt  in  actively  by  brokers  or  has  other 
active  market,  the  latest  sale  price  prior  to  the 
day  of  death  will  govern."     (Art.  15,  par  [2]). 

§  100.  Same — Stock  of  close  corporations. 

The  Regulations  provide: 

1 '  If  there  is  no  active  market  for  the  stock  and 
no  sales  of  it  have  been  within  a  reasonable 
period  of  the  decedent 's  death,  and  in  particular 
where  it  is  closely  held  (stock  of  a  ' close  cor- 
poration'), return  should  be  made  upon  the 
basis  of  the  value  of  the  stock,  as  evidenced  by 
the  clear  value  of  the  excess  of  the  assets  of  the 
corporation  over  its  liabilities,  and  its  earning 

3.  As  tending  to  support  this  rule,  see  Walker  v.  People, 
192  111.  106,  61  N.  E.  Rep.  489 ;  Matter  of  Gould,  19  App.  Div. 
352,  46  N.  Y.  Supp.  506,  156  N.  Y.  423,  51  N.  E.  Rep.  287. 


VALUATION  OF  PROPERTY.  97 

Pledged  securities. 

capacity  for  the  five  years  preceding  the  death 
of  the  decedent.  Where  the  earnings  of  the 
corporation  have  been  greater  than  a  fair  return 
on  its  invested  capital,  computed  according  to 
the  nature  of  the  business,  and  where  the  busi- 
ness is  a  going  business,  there  should  be  added 
to  the  net  value  of  the  other  assets  of  the  busi- 
ness the  value  of  the  good  will,  computed  in  ac- 
cordance with  sound  accounting  principles. 
Where  the  earnings  of  the  corporation  have  been 
less  than  a  fair  return  on  the  invested  capital, 
if  the  difference  is  material  and  the  decreased 
earnings  affect  value,  the  net  worth  of  the  cor- 
poration as  disclosed  by  its  balance  sheet  may 
be  adjusted  on  a  reasonable  basis  to  allow  for 
this  decreased  value.  In  all  cases  where  stock 
of  this  character  forms  a  principal  asset,  there 
should  be  submitted  with  the  return,  Form  706, 
a  copy  of  the  balance  sheets  for  the  five  preced- 
ing years,  and  of  the  balance  sheet  on  the  day 
of  death  or  the  nearest  date  thereto,  together 
with  a  statement  of  the  net  earnings  of  the  in- 
vested capital  for  the  preceding  five  years." 
(Art.  15,  par.  [2]). 

§  101.  Pledged  securities. 
The  Regulations  provide: 

"The  full  value  of  securities  pledged  to  secure 
a  loan  should  be  included  in  the  gross  estate. 
If  the  decedent  had  a  trading  account  with  a 
broker,  all  securities  belonging  to  the  decedent 

7 


98  FEDERAL  ESTATE  TAX. 

Promissory   notes — Computation   of  interest. 

held  by  the  broker  at  the  date  of  death  must  be 
included  at  their  market  value  on  that  date. 
Securities  purchased  on  margin  for  the  deced- 
ent's account  and  held  by  the  broker  should 
also  be  returned  at  their  market  value  on  the 
day  of  death.  The  amount  of  the  decedent's  in- 
debtedness to  the  broker  will  be  allowed  as  a 
deduction  from  the  gross  estate."  (Art.  15, 
par.  [2]). 

§  102.  Promissory  notes. 

The  Regulations  provide: 

"Notes,  whether  secured  or  unsecured,  will 
be  presumed  to  be  worth  their  full  face  value, 
plus  accrued  interest  to  the  date  of  decedent's 
death,  unless  the  executor  establishes  the  right 
to  return  them  at  a  lower  valuation.  *  *  * 
In  the  case  of  an  unsecured  note  it  must  be 
shown  by  satisfactory  evidence,  in  order  to 
justify  failure  to  include  it,  that  the  note  is  un- 
collectible, either  in  whole  or  in  part,  from  the 
maker  or  other  parties  to  the  note,  on  account 
of  the  insolvency  of  the  parties  thereto,  or  other 
cause.  Where  the  note  is  secured  it  must  also 
be  shown  that  the  security  is  insufficient  to 
satisfy  it."    (Art.  15,  par.  [3]). 

§  103.  Same — Computation  of  interest. 

The  Regulations  provide: 

"Interest  should  be  computed  upon  the  basis 
of  365  days  to  the  year."     (Art.  15,  par.  [3]). 


VALUATION  OF  PROPERTY.  99 

Computation    of   bond   interest — Outlawed   notes. 

This  rule,  however,  is  not  of  unvarying  applica- 
tion, but  may  be  affected  by  the  local  law.  Where, 
for  instance,  a  State  statute  provides4  that  in  the 
computation  of  interest  for  a  period  of  less  than  one 
year  the  computation  should  be  made  upon  the  basis 
of  360  days  to  the  year,  this  rule  is  adopted  by  the 
Bureau,  since,  as  a  practical  matter,  the  value  of  the 
notes  is  affected  by  the  rule  of  the  statute.5 

§  104.  Same — Computation  of  bond  interest. 

The  Regulations  do  not  contain  an  express  provi- 
sion as  to  computing  the  interest  on  bonds;  but 
probably  the  same  rule  would  ordinarily  apply  as  in 
the  case  of  notes.  That  is,  interest  would  be  com- 
puted upon  the  basis  of  365  days  to  the  year.  Where 
it  appears,  however,  that  the  custom  obtaining  in 
the  sale  of  bonds  is  to  add  to  the  quotation  value  of 
the  bond  interest  computed  upon  the  basis  of  360 
days  to  the  year,  this  method  is  adopted  by  the 
Bureau  for  the  reason  that  the  market  value  of  the 
bond  is  determined  in  the  manner  specified. 

§  105.  Notes  apparently  barred  by  statute  of  limita- 
tions. 
The  Regulations  provide: 

"Where  a  note  appears  to  be  barred  by  the 
statute  of  limitations  its  value  must  be  included 
in  the  gross  estate  in  the  absence  of  proof  that 

4.  As  in  California,  see  Civil  Code  of  Cal.,  Sec.  1917. 

5.  For  a  similar  rule  as  to  bonds,  see  infra,  Sec.  104. 


100  FEDERAL  ESTATE  TAX. 

Cash  on  deposit. 

the  liability  has  not  revived  by  promise  to  pay 

or  part  payment,  and  also  that  the  parties  liable 

refuse  to  pay  the  debt  and  intend  to  assert  the 

defense."     (Art.  15,  par.  [3]). 

This  ruling  is  evidently  based  upon  the  generally 

established  doctrine  that  the  running  of  the  statute 

does  not  affect  the  existence  of  the  liability,  but  is 

merely  a  defence  which  may  be  waived,  and  which, 

if  waived,  does  not  stand  in  the  way  of  enforcement. 

§  106.  Cash  on  deposit. 

The  Regulations  provide: 

"Bank   deposits   should  be   returned   at  the 

amount  for  which  the  bank  would  be  liable  if 

the  deposit  were  withdrawn  upon  the  date  of 

the  decedents'  death.    Interest  which  the  bank 

agreed  to  pay  upon  condition  that  the  money 

remain  on  deposit  after  the  death  should  not  be 

included."     (Art.  15,  par.   [4]). 

There  will  be  included  in  the  gross  estate  of  the 

decedent  not  only  money  standing  in  his  name,  but 

his  interest  in  a  bank  balance  standing  in  the  name 

of  another  nonresident  who  predeceased  him,  and 

this  although  no  administration  has  been  taken  out 

upon  the  estate  of  the  latter  decedent.6 

6.  See  Gleason  &  Otis  on  Inheritance  Taxation,  2d  Ed.,  p.  20: 
"The  right  of  the  State  to  the  tax  is  coincident  with  the 
devolution  of  title  or  interest,  and  the  right  of  the  State  to 
exact  a  tax,  as  well  as  the  obligation  of  the  transferee  to  pay 
it,  depend  not  upon  a  formal,  complete  and  immediate  change 
of  title  or  possession,  but  upon  the  instant  right  to  a  bene- 


VALUATION  OF  PROPERTY.  101 

Interest  in  business — Good  will. 

§  107.  Interest  in  business — Original  and  present 
rule. 
The  Regulations  of  1919  provide: 

"Care  should  be  taken  to  arrive  at  an  accurate 
valuation  of  any  business  in  which  the  decedent 
was  interested,  whether  as  partner  or  proprie- 
tor. The  executor  should  not  return  the  interest 
at  its  book  value  unless  he  is  satisfied  that  the 
accounts  of  the  business  are  kept  upon  a  scien- 
tific basis.  A  fair  appraisal  as  of  the  date  of 
death  should  be  made  of  all  the  assets  of  the 
business,  tangible  and  intangible.  *  *  *  The 
business  should  be  given  a  net  worth  equal  to 
the  amount  a  financially  competent  buyer, 
whether  an  invididual  or  corporation,  might  be 
expected  to  pay  at  a  normal  sale  in  view  of  the 
net  value  of  the  assets  and  the  demonstrated 
earning  capacity."    (Art.  15,  par.  [5]). 

§  108.  Same — Good  will — Original  contract  limiting 
right  of  partner. 
The  Regulations  of  1919  further  provide: 

"Special  attention  should  be  given  to  fixing 
an  adequate  figure  for  the  value  of  the  good  will 
of  the  business  in  all  eases  in  which  the  decedent 
had  an  interest  in  the  good  will  which  passed  to 
his  estate.  Where  the  original  copartnership 
articles,  or  a  renewal  thereof,  provide  that  the 

ficial  share  or  interest  subject  only  to  the  due  administration 
of  the  estate."  Citing  Matter  of  Ramsdill,  190  N.  Y.  492,  83 
N.  E.  Rep.  584;  Kingsbury  v.  Chapin,  196  Mass.  533,  82  N.  E. 
Rep.  700. 


102  FEDERAL  ESTATE  TAX. 

Good  will — Original  contract  limiting  right  of  partner. 

value  of  the  interest  of  a  deceased  partner  shall 
be  determined  without  reference  to  good  will, 
but  that  the  surviving  partners  shall  take  the  en- 
tire good  will,  nothing  is  to  be  included  in  the 
estate  of  the  deceased  partner  on  account  of  good 
will.     Where,   however,   the   deceased   partner 
makes  a  gift  of  his  interest  in  the  good  will  to 
the  surviving  partners,  to  take  effect  upon  his 
death,  the  value  of  such  interest  should  be  in- 
cluded in  the  decedent's  gross  estate.     Such  a 
gift  exists  where  the  only  consideration  for  the 
surrender  of  the  good  will  at  death  consists  of 
similar  promises  by  the  other  partners."     (Art. 
15,  par.  [5]). 
Where  the  copartnership  articles  provide  for  the 
acquisition  of  the  interest  of  a  deceased  partner, 
without  allowance  for  good  will,  the  substance  of  the 
arrangement  is,  that  the  deceased  partner  acquired 
only  a  life  estate  in  the  good  will;  and  such  an  in- 
terest, terminating  upon  the  life  of  the  decedent,  fur- 
nishes nothing  that  can  be  included  in  his  gross 
estate.7     There  is  State  authority  that  under  these 
circumstances  the  good  will  is  not   subject  to  in- 
heritance tax.8 

Where,  on  the  other  hand,  a  partner  is  vested  with 
his  share  in  the  good  will,  and  surrenders  it  to  the 
surviving  partners,  there  is  a  gift  intended  to  take 
effect  at  death ;  and  there  is  authority  that  the  dona- 
tive character  of  the  transaction  is  not  changed  by 

7.  See  supra,  p.  22. 

8.  In  re  Borden's  Estate,  159  N.  Y.  Supp.  346,  348. 


VALUATION  OF  PROPERTY.  103 

Patents,  etc. — Accounts  receivable,  etc. 

the  fact  that  the  other  partners  make  similar  en- 
gagements.9 

The  revision  of  1921,  however,  makes  material 
changes ;  and  it  is  not  clear  to  what  extent  the  above 
rules  are  still  in  force.    (See  infra,  p.  395.) 

§  109.  Patents,  trade  marks  and  copyrights. 
The  Regulations  provide: 

"The  basis  for  valuation  of  intangible  assets 
of  this  character  is  the  present  worth  of  the 
estimated  future  earnings  of  the  exclusive  right 
during  the  rest  of  its  existence.  The  return  re- 
ceived by  the  decedent  should  be  considered  in 
estimating  future  earnings."  (Art.  15,  par. 
[6]). 

§  110.  Accounts  receivable,  claims,  judgments,  etc. 
The  Regulations  provide: 

"A  fair  valuation  for  assets  of  this  character 
at  the  time  of  death  should  be  fixed  by  the  execu- 
tor according  to  the  best  information  available 
to  him  at  the  time  of  making  return.    A  right 

9.  In  re  Orvis's  Estate,  223  N.  Y.  1,  119  N.  E.  Rep.  88;  In  re 
Cory's  Estate,  177  App.  Div.  871,  164  N.  Y.  Supp.  956,— affd. 
221  N.  Y.  Memo.  612,  117  N.  E.  Rep.  1065;  In  re  Burgheimer  's 
Estate,  154  N.  Y.  Supp.  943. 

The  provisions  of  the  Regulations  seem  to  find  support  in 
these  authorities.  The  rule  last  stated  has  been  extended  to 
the  case  of  a  close  corporation  in  which  the  directors,  being 
the  same  as  the  stockholders,  pass  a  resolution  empowering  the 
corporation  to  acquire  the  stock  of  a  deceased  shareholder  at 
a  price  less  than  its  true  value. 


104  FEDERAL  ESTATE  TAX. 

Tangible  property — Crops. 

of  action  which  died  with  the  decedent  should 
not  be  included  in  the  gross  estate."  (Art.  15, 
par.  [7]).10 

§  111.  Tangible  property. 

As  to  tangible  personalty  other  than  household 
furniture  and  personal  effects,  the  Regulations  pro- 
vide: 

"With  respect  to  all  other  tangible  property 
the  executor  should  endeavor  to  arrive  at  the 
sound  and  actual  value  at  the  day  of  death. 
Where  such  property  is  subsequently  sold  the 
sale  price  must  be  returned  if  the  sale  was  a 
bona  fide  sale  and  for  the  best  price  obtainable.' ' 
(Art.  15,  par.  [8]). 

§  112.  Crops. 

The  Regulations  provide: 

"In  the  case  of  growing  crops  the  executor 
should  ascertain  from  expert  opinion  what  the 
value  of  the  growing  crop  was  on  the  day  of 
death,  as  evidenced  ,"by  subsequent  yield  and 
crop  prices.  Where  the  crop  is  matured  the 
value  is  the  value  of  the  crop  unit  on  the  day  of 
death  for  the  entire  yield,  less  the  cost  of  har- 
vesting and  marketing.  Where  the  crop  is  not 
matured  these  factors  should  be  considered ;  and 
the  opinion  of  those  expert  in  such  matters 
should  be  ascertained  as  to  what  the  crop  was 

10.  See  supra,  p.  24. 


VALUATION  OF  PROPERTY.  105 


Personal    and    household    effects — Value    less    than    $2,000. 


reasonably  worth  as  a  growing  crop  on  the  day 
of  death."    (Art.  15,  par.  [8]). 

113.  Personal  and  household   effects  to   be   ap- 

praised. 

The  Regulations  provide: 

"Executors  and  administrators  are  required 
to  have  careful  appraisal  made  of  all  household 
and  personal  effects  of  the  decedent,  and  to  fur- 
nish in  duplicate  detailed  lists  and  affidavits  in 
the  manner  directed  below.  No  distribution  of 
such  effects  may  be  made  until  the  lists  and 
affidavits  have  been  filed  with  the  collector,  and, 
if  deemed  necessary,  sufficient  time  afforded  the 
Bureau  to  have  personal  inspection  made  by  an 
official  appraiser.  Where  it  is  desired  to  dis- 
tribute or  sell  all  the  property  in  advance  of  the 
filing  of  the  return,  the  lists  and  affidavits  should 
be  filed  with  the  collector,  together  with  a  let- 
ter stating  when  it  is  desired  to  effect  distribu- 
tion. If  personal  inspection  by  an  internal- 
revenue  officer  is  not  deemed  necessary,  a  waiver 
of  such  examination  will  be  sent  to  the  executor, 
who  may  thereupon  proceed  with  distribution." 
(Art.  16.) 

114.  Same— When  value  is  less  than  $2,000. 
The  Regulations  provide: 

"When  the  value  of  the  personalty  involved  is 
less  than  $2,000,  the  detailed  lists  may  be  pre- 
pared by  the  executor  personally.    A  room  by 


106  FEDERAL  ESTATE  TAX. 

When  value  is  less  than  $2,000. 

room  appraisal  is  desirable;  and  all  the  articles 
should  be  named  specifically,  except  those  of 
small  value,  such  as  common  bric-a-brac  or 
cheap  books.  A  separate  value  should  be  given 
for  each  article  named,  except  that  the  values 
of  a  number  of  articles  contained  in  the  same 
room  may  be  grouped.  The  value  of  an  article 
worth  more  than  $50  should  be  stated  separ- 
ately. Such  an  entry  as  the  following  would  be 
acceptable: 

"Dining  room:  Table,  six  chairs,  three  pic- 
tures (common  prints),  value  $75;  sideboard 
$60;  total  $135. 

4 'If  there  should  be  included  in  the  lot,  how- 
ever, jewelry  or  silverware  of  more  than  ordin- 
ary value,  or  articles  having  a  marked  artistic 
value,  the  executor  must  furnish  an  appraisal 
by  persons  thoroughly  qualified  by  training  and 
experience  to  judge  of  the  value  of  such  articles. 

"In  the  case  of  effects  having  a  total  value  of 
less  than  $2,000,  the  executor  may  furnish  as  an 
alternative  requirement  a  sworn  estimate  in 
duplicate  of  the  approximate  total  value  of  the 
property  by  a  professional  appraiser  of  recog- 
nized standing  and  ability,  or  by  a  dealer  in  the 
class  of  personalty  involved. 

"In  addition  to  the  lists  or  estimates  described 
above,  the  executor  must  furnish  in  duplicate 
his  affidavit  as  to  the  completeness  of  the  lists 
and  the  qualifications  of  the  appraiser."  (Art. 
17.) 


VALUATION  OF  PROPERTY.  107 


When  value  is  more  than  $2,000. 


§  115.  Same — When  value  is  more  than  $2,000. 

The  Regulations  provide: 

' 'When  the  value  of  the  effects  is  more  than 
$2,000,  detailed  lists  must  be  furnished,  pre- 
pared by  professional  appraisers  of  recognized 
competence,  or  by  dealers  in  the  particular 
classes  of  personalty  involved.  The  lists  must 
be  prepared  in  the  same  detail  as  that  indicated 
above  for  the  executor's  list.  Where  the  per- 
sonalty includes  jewelry,  silverware,  or  like  ar- 
ticles, except  in  cases  where  the  value  of  these 
items  is  insignificant,  the  appraisal  of  a  reput- 
able dealer  or  appraiser  of  jewelry  must  be  fur- 
nished. 

''In  the  case  of  articles  having  marked  artistic 
value,  such  as  paintings,  engravings,  etchings, 
statuary,  vases,  oriental  rugs,  or  antiques,  the 
appraisals  of  experts  will  be  required.  The  de- 
scription of  such  articles  should  be  fully  given. 
Where  paintings  having  artistic  value  are  listed, 
the  size,  subject,  and  artist  should  be  named.  In 
the  case  of  oriental  rugs,  the  size,  make,  age, 
etc.,  should  be  given.  The  weight  in  ounces  of 
each  article  of  silverware  should  be  stated. 
With  the  duplicate  lists  there  must  be  filed  the 
executor's  affidavit  as  to  the  completeness  of  the 
list  and  the  qualifications  of  the  appraisers." 
(Art.  18.) 


108  FEDERAL  ESTATE  TAX. 

Appraisers — Limitation   of  provisions. 

§  116.  Same — Appraisers  and  basis  of  appraisals. 

The  Regulations  provide: 

"  Where  expert  appraisers  are  to  be  employed, 
care  should  be  taken  to  see  that  they  are  men  of 
recognized  competence  with  respect  to  the  par- 
ticular class  of  property  involved.  In  order  to 
facilitate  the  acceptance  of  the  appraisal,  ap- 
praisers should  be  employed  whose  competence 
is  well  established. 

"The  basis  to  be  employed  in  appraising  ar- 
ticles of  this  character  is  what  they  would  bring 
at  a  bona  fide  sale  to  individual  purchasers,  to 
dealers,  or  upon  a  well-advertised  auction  sale. 
If  there  has  been  an  actual  bona  fide  sale,  the 
amount  received  may  be  returned  as  the  value 
of  the  property.  Where  property  is  valued  by 
legatees  for  purposes  of  distribution,  such  value 
will  not  necessarily  be  accepted.  The  original 
cost  of  the  articles  is  not  necessarily  a  proper 
basis,  on  account  of  depreciation  or  apprecia- 
tion in  value."     (Art.  19.) 

§  117.  Limitation  of  foregoing  provisions. 

As  the  language  quoted  shows,  the  provisions  of 
the  Regulations  are  limited  to  household  and  per- 
sonal effects  of  the  decedent.  An  appraisal  is  not  re- 
quired of  other  property  than  that  specified;  as,  for 
example,  farm  property,  such  as  grain  or  live  stock, 
or  securities,  such  as  bonds  or  mortgages.  Where 
the  property  is  perishable  a  provision  for  its  ap- 
praisal might,  it  would  seem,  be  a  wise  one.    It  is, 


VALUATION  OF  PROPERTY.  109 

Annuities  for  the   life  of  another  person. 

of  course,  the  duty  of  the  executor  in  all  cases  to  re- 
port the  true  value  of  the  property  at  the  time  of  the 
death  as  nearly  as  he  can  ascertain  it. 

§  118.  Annuities  for  the  life  of  another  person. 
The  Regulations  provide: 

"Where  the  decedent  was  entitled  to  receive 
an  annuity  of  a  definite  amount  during  the  life- 
time of  another  person,  and  the  right  constitutes 
an  asset  of  his  estate,  the  present  worth  of  the 
annuity  at  the  time  of  the  decedent's  death  must 
be  computed  upon  the  basis  of  the  expectancy 
of  life  of  the  other  person.  The  table  marked 
"A"  upon  page  19  should  be  used  for  this  com- 
putation. The  amount  of  annual  income  should 
be  multiplied  by  the  figure  in  column  3  of  the 
table  opposite  the  number  of  years  in  column  1 
nearest  to  the  actual  age  of  the  other  person. 

"Example:  The  decedent  received  under  the 
terms  of  his  father's  will  an  annuity  of  $10,000 
for  the  life  of  his  elder  brother.  The  brother  at 
the  decedent's  death  was  40  years  8  months  old. 
By  reference  to  the  table  the  figure  in  column  3 
opposite  41  years,  the  number  nearest  to  the 
brother's  age,  is  found  to  be  14.86102.  The  pres- 
ent worth  of  the  annuity  is  therefore  $148,- 
610.20."  (Art.  20.) 
The  table  referred  to  is  the  following: 


110 


FEDERAL  ESTATE  TAX. 


Annuities  for  the  life  of  another  person. 


Table  "A.': 
Table,  single  life,  4  per  cent,  showing  the  present  worth  of  an  an- 
nuity, or  life  interest,  and  of  a  reversionary  interest 


1 

2 

3 

4 

1 

2 

3 

4 

Annuity,  or 

Reversion,  or 

Annuity,  or 

Reversion,  or 

present  value 

present  value 

present  value 

present  value 

of  $1  due  at 

of  $1  due  at 

of  $1  due  at 

of  $1  due  at 

Expect- 

the end  of 

the  end  of 

Expect- 

the end  of 

the  end  of 

Age. 

ancy  of 

each  year 

the  year  of 

Age. 

ancy  of 

each  year 

the  year  of 

life. 

during  the 

death  of  a 

life. 

during  the 

death  of  a 

life  of  a 

person  of 

life  of  a 

person  of 

person  of 

specified  age. 

person  of 

specified  age 

specified  age. 

specified  age. 

Annuity. 

Reversion. 

Annuity. 

Reversion. 

0 

23.179 

$14.72829 

$0.39507 

51 

17.527 

$12.17919 

$0.49311 

1 

30 . 552 

17.30771 

.29586 

52 

16.947 

11.88408 

. 50446 

2 

35.626 

18.69578 

.24247 

53 

16.372 

11.58531 

.51595 

3 

37.572 

19.15901 

.22465 

54 

15.804 

11.28325 

. 52757 

4 

38.702 

19.41226 

.21491 

55 

15.243 

10.99789 

.53931 

5 

39.352 

19 . 55301 

. 20950 

56 

14.689 

10.66982 

.55116 

6 

39.654 

19.61731 

.20703 

57 

14.143 

10.35931 

.56310 

7 

39.691 

19.62502 

. 20673 

58 

13.603 

10.04630 

.57514 

8 

39.625 

19.61097 

. 20727 

59 

13.072 

9.73131 

.58726 

9 

39 . 264 

19.53413 

.21022 

60 

12.549 

9.41474 

. 59943 

10 

38.891 

19.45359 

.21332 

61 

12.029 

9.09765 

.61163 

11 

3S . 507 

19.36943 

.21656 

62 

11.532 

8.78052 

.62382 

12 

38.113 

19.28184 

.21993 

63 

11.039 

8.46412 

.63600 

13 

37.710 

19.19065 

.22344 

64 

10 . 557 

8 . 14888 

.64812 

14 

37.298 

19.09590 

.22708 

65 

10.088 

7.83552 

66017 

15 

36.877 

18.99764 

. 23086 

66 

9.630 

7.52476 

.67212 

16 

36.447 

18.89569 

.23478 

67 

9 .  185 

7.21699 

.68396 

17 

36.010 

18.79010 

.23884 

68 

8.753 

6.91298 

.69565 

18 

35.565 

18.68070 

.24305 

69 

8.333 

6.61301 

.70719 

19 

35.113 

18.56751 

.24740 

70 

7.926 

6.31716 

.71857 

20 

34 . 652 

18.45038 

.25191 

71 

7.532 

6.02612 

.72976 

21 

34.186 

18.32932 

. 25656 

72 

7.151 

5 . 74003 

. 74077 

22 

33.711 

18.20416 

.26138 

73 

6.782 

5.45928 

.75157 

23 

33.230 

18.07471 

.26636 

74 

6.425 

5.18402 

.76215 

24 

32.742 

17.94097 

.27150 

75 

6.081 

4.91463 

.77251 

25 

32.248 

17.80274 

.27682 

76 

5.749 

4.65125 

.78264 

26 

31.747 

17.65984 

.28231 

77 

5.428 

4 . 39383 

.79254 

27 

31.239 

17.51224 

. 28799 

78 

5.119 

4 . 14286 

. 80220 

28 

30.725 

17.35968 

. 29386 

79 

4.823 

3.89858 

.81159 

29 

30.205 

17.20225 

.29991 

80 

4 .  537 

3.66071 

. 82074 

30 

29.678 

17.03961 

.30617 

81 

4.262 

3.42900 

.82965 

31 

29.147 

16.87176 

.31262 

82 

3.995 

3.20258 

. 83836 

32 

28.608 

16.69846 

.31929 

83 

3.737 

2 . 98024 

.84691 

33 

28.067 

16.51964 

.32617 

84 

3.484 

2.76106 

.85534 

34 

27.516 

16.33503 

.33327 

85 

3.236 

2.54366 

.86371 

35 

26.961 

16.14437 

.34060 

86 

2.992 

2.32795 

. 87200 

36 

26.401 

15.94755 

.34817 

87 

2.752 

2.11384 

.88024 

37 

25 . 834 

15.74427 

. 35599 

88 

2.517 

1.90115 

.88842 

38 

25 . 263 

15.53421 

.36407 

89 

2.286 

1.69107 

.89650 

39 

24.685 

15.31722 

.37241 

90 

2 .  0^2 

1.48540 

.90441 

40 

24.101 

15.09295 

.38104 

91 

1.845 

1.28432 

.91214 

41 

23.511 

14.86102 

.38996 

92 

1.637 

1.09024 

.91961 

42 

22.915 

14.62122 

.39918 

93 

1.442 

.90647 

.92667 

43 

22.313 

14.37356 

.40871 

94 

1.263 

. 73687 

.93320 

44 

21.708 

14.11860 

.41852 

95 

1.103 

. 58435 

.93906 

45 

21.103 

13.85713 

.42857 

96 

.975 

.46182 

.94378 

46 

20.499 

13.58958 

.43886 

97 

.877 

. 36608 

.94742 

47 

19 . 896 

13.31698 

.44935 

98 

.746 

.24038 

.95229 

48 

19.298 

13.03942 

.46002 

99 

.500 

. 00000 

.66154 

49 

18.703 

12.75716 

.47088 

1 

50 

18.113 

12.47032 

.48191 

VALUATION  OF  PROPERTY. 


Ill 


Annuities  for  a  term  of  years. 


§  119.  Annuities  for  a  term  of  years. 
The  Regulations  provide: 

"Where  the  decedent  was  entitled  to  receive 
the  annuity  during  a  specified  number  of  years, 
the  table  marked  "B"  upon  page  20  should  be 
used. 

"Example:  The  decedent  received  under  the 
terms  of  his  father's  will  an  annuity  of  $10,000 
for  a  period  of  20  years,  15  of  which  had  expired 
at  the  decedent's  death.  By  reference  to  the 
table  it  is  found  that  the  figure  in  column  2  op- 
posite 5  years,  the  unexpired  portion  of  the  20- 
year  period,  is  4.45182.  The  present  worth  of 
the  annuity  is,  therefore,  $44,518.20  (4.45182 
multiplied  by  10,000)."  (Art.  20.) 
The  table  referred  to  is  the  following: 


Table  "B." 


1 

2 
Present  worth 

3 

1 

2 
Present  worth 

3 

of  an  annuity 

Present  worth 

of  an  annuity 

Present  worth 

Num- 

of SI ■  payable 

of  $1,  payable 

Num- 

of $1,  payable 

of  SI,  payable 

ber  o( 

at  the  end  of 

at  the  end  of  a 

ber  of 

at  the  end  of 

at  the  end  of  a 

years. 

each  year  for  a 

certain  number 

years. 

each  vear  for  a 

certain  number 

certain  number 

of  years. 

certain  number 

of  years. 

of  years. 

of  years. 

Annuity 

Reversion 

Annuity 

Retention 

1 

SO. 96154 

SO. 96 1538 

16 

SI  165229 

SO. 533908 

2 

1.88609 

.924556 

17 

12.16567 

.513373 

3 

2 . 77509 

. S88996 

18 

12.65929 

.493628 

4 

3.62989 

.854804 

19 

13.13394 

.474642 

5 

4.45182 

.821927 

20 

13.59032 

456387 

6 

5.24214 

.790314 

21 

14.02916 

.438834 

7 

6.00205 

.759918 

22 

11   45111 

421955 

8 

6.73274 

.730690 

23 

14.85684 

405726 

0 

7.43533 

.702587 

24 

15.24696 

.390121 

10 

8.11089 

.675564 

25 

15  62208 

375117 

11 

8.76047 

.649581 

26 

15.98277 

360689 

12 

9.38507 

.624597 

27 

16  32958 

346816 

13 

9.98565 

.600574 

28 

16.66306 

.333477 

14 

10.56312 

577475 

29 

16.98371 

.320651 

16 

11.11839 

.55526.', 

30 

17.29203 

.308319 

112  FEDERAL  ESTATE  TAX. 

Computation  where  rate  of  income  is  fixed  or  determinable. 

§  120.  Computation  where  rate  of  income  is  fixed  or 
determinable. 
The  Regulations  provide: 

"Where  the  decedent  was  entitled  to  receive 
the  entire  income  of  certain  property  during  the 
life  of  another  or  for  a  term  of  years,  and  where 
the  rate  of  income  is  fixed  by  the  instrument 
creating  the  trust  or  is  definitely  determinable 
at  the  time  of  the  decedent's  death,  the  average 
annual  income  which  the  property  actually 
yields  should  be  determined,  and  its  present 
worth  computed,  as  explained  above  in  the  case 
of  annuities. 

"Example:  The  decedent's  father  placed 
$100,000  in  trust,  with  directions  that  it  be  in- 
vested in  state  and  municipal  bonds  and  the  en- 
tire income  paid  to  the  decedent  during  the  life 
of  his  elder  brother,  who  was  41  years  old  at  the 
decedent's  death.  Before  the  decedent's  death 
the  money  was  invested  in  state  and  municipal 
bonds,  and  actually  yielded  a  net  return  of 
$5,000  per  annum.  In  this  case  the  rate  of  in- 
come is  definitely  determinable.  By  reference 
to  the  table  it  is  found  that  the  present  worth 
of  an  income  of  $5,000  dependent  upon  the  life 
of  a  person  41  years  of  age,  is  $74,305.10 
(14.86102  multiplied  by  5,000)."     (Art.  20.) 


VALUATION  OF  PROPERTY.  113 


Rate  of  income  not  determinable — Valuation  remainder  interest. 


§  121.  Computation  where  rate  of  income  is  not  de- 
terminable. 
The  Regulations  provide: 

"Where  the  rate  of  annual  income  is  not  de- 
terminable, or  where  the  decedent  was  entitled 
merely  to  the  personal  use  of  nonincom-bearing 
property,  a  hypothetical  annuity  at  a  rate  of  4 
per  cent  of  the  value  of  the  property  should  be 
made  the  basis  of  the  calculation. 

"Example:  The  decedent  died  before  a  fund 
of  $100,000,  of  which  he  was  entitled  to  receive 
the  income  during  the  life  of  a  person  41  years 
old,  had  been  invested  by  the  trustees.  The 
value  of  a  hypothetical  annuity  of  $4,000,  de- 
pendent upon  the  life  of  such  a  person,  is  in- 
dicated by  the  table  to  be  $59,444.08."  (Art. 
20.) 

§  122.  Valuation  of  remainder  interest. 
The  Regulations  provide: 

"Where  the  decedent  possessed  a  remainder 
interest  in  property  subject  to  the  life  estate  of 
another,  and  such  interest  constituted  an  asset 
of  his  estate,  the  present  worth  of  the  remainder 
interest  at  the  time  of  death  should  be  obtained 
by  multiplying  the  value  of  the  property  at  the 
time  of  death  by  the  figure  in  column  4  of  Table 
A  opposite  the  number  of  years  nearest  to  the 
age  of  the  life  tenant.  Where  the  remainder  in- 
terest is  subject  to  an  estate  for  a  term  of  years 
Table  B  should  be  used. 

8 


114  FEDERAL  ESTATE  TAX. 

Valuation  of  contingent  interests. 

"Example:  The  decedent  was  entitled  to  re- 
ceive property  worth  $50,000  upon  the  death  of 
his  elder  brother,  to  whom  the  income  for  life 
had  been  bequeathed.  The  brother  at  the  time 
of  the  decedent's  death  was  31  years  old.  By 
reference  to  the  table  it  is  found  that  the  figure 
in  column  4  opposite  31  years  is  0.31262.  The 
present  worth  of  the  remainder  interest  is,  there- 
fore, $15,631."     (Art.  20.) 

§  123.  Valuation  of  contingent  interests. 

As  already  seen,  interests,  whether  properly  styled 
vested  or  contingent,  are  proper  subjects  for  inclu- 
sion in  the  gross  estate,  even  though  there  is  a  pos- 
sibility that  they  will  be  wholly  defeated  by  events 
occurring  after  the  decedent's  death.11  A  reason- 
able valuation,  however,  is  placed  upon  such  inter- 
ests; and  where  they  are  purely  speculative — as 
where  they  depend  upon  the  discretionary  action  of 
individuals — the  tendency  is  to  value  them  at  a  nomi- 
nal sum,  unless  there  are  special  circumstances  in- 
dicating a  probability  that  the  interest  will  be  rea- 
lized by  the  estate.  The  ordinary  test  of  market,  or 
sale,  value  would  apply  to  such  interests.  Nor,  it  is 
held,  is  it  permissible  to  make  a  revaluation  of  the 
interest  at  a  subsequent  date  when  the  contingency 
has  happened,  since  the  valuation  is  required  to  be 
made  as  of  the  death  of  the  decedent,  and  such  a 
course  would  obviously  substitute  a  valuation  of  the 
interest  at  a  later  date. 

11.  See  supra,  p.  21. 


VALUATION  OF  PROPERTY.  115 

Valuation  of  intoxicating  liquors — Valuation  of  German  mark. 

§  124.  Valuation  of  intoxicating-  liquors. 

Full  effect  is 'given  by  the  Bureau  to  the  recent 
legislation  restraining  or  prohibiting  the  use  of  in- 
toxicating liquors,  and  correspondingly  diminishing 
their  value.  Thus,  where  the  decedent  died  while 
war  time  prohibition  was  in  force,12  the  value  of  the 
liquor  for  beverage  purposes  is  not  included  in  the 
gross  estate,  but  merely  their  value  for  legal  uses, 
namely,  for  non-beverage  purposes  and  for  export.1'" 

§  125.  Valuation  of  German  mark. 

Where  the  decedent  died  during  the  late  war,  leav- 
ing German  marks,  their  value  is  determined  by  the 
Bureau  by  reducing  the  mark  to  the  currency  of  some 
neutral  country  at  the  rate  of  exchange  prevailing 
at  the  decedent's  death,  and  then  ascertaining  the 
value  of  such  substituted  currency  according  to  the 
rate  of  exchange  between  such  country  and  the 
United  States. 

12.  The  period  from  June  30,  1919,  to  the  date  when  the 
Eighteenth  Amendment  went  into  operation.  See  Act  of 
November  21,  1918  (40  Stat.  1045). 

13.  See  Act  of  November  21,  1918;  40  Stat.  1045,  Chap.  212, 
par.  fourth. 


CHAPTER  IV. 

DEDUCTIONS. 

RESIDENT    ESTATES. 

§  126.  The  present  statute. 

The  statute  provides  as  follows: 

"That  for  the  purpose  of  the  tax  the  value  of 
the  net  estate  shall  be  determined — 

(a)  In  the  case  of  a  resident,  by  deducting 
from  the  value  of  the  gross  estate — 

(1)  Such  amounts  for  funeral  expenses,  ad- 
ministration expenses,  claims  against  the  estate, 
unpaid  mortgages,  losses  incurred  during  the 
settlement  of  the  estate  arising  from  fires, 
storms,  shipwreck,  or  other  casualty,  or  from 
theft,  when  such  losses  are  not  compensated  for 
by  insurance  or  otherwise,  and  such  amounts 
reasonably  required  and  actually  expended  for 
the  support  during  the  settlement  of  the  estate 
of  those  dependent  upon  the  decedent,  as  are 
allowed  by  the  laws  of  the  jurisdiction,  whether 
within  or  without  the  United  States,  under 
which  the  estate  is  being  administered,  but  not 
including  any  income  taxes  upon  income  re- 
ceived after  the  death  of  the  decedent,  or  any 
estate,  succession,  legacy,  or  inheritance  taxes." 
(Sec.  403  [a]  [1]). 

§  127.  The  former  statute. 

The  language  of  the  Revenue  Act  of  1916  is  identi- 
cal with  that  of  the  present  act  up  to  and  including 
the  provision  relating  to  the  support  of  dependents. 

[116] 


DEDUCTIONS.  117 


The  former  statute. 


The  remainder  of  the  section  reads:  "and  such  other 
charges  against  the  estate  of  the  decedent  as  are  al- 
lowed by  the  laws  of  the  jurisdiction  *  *  '  under 
which  it  is  being  administered.1 

The  present  statute  differs  (a)  in  omitting  the  ref- 
erence to  "such  other  charges;"  and  (b)  in  provid- 
ing expressly  that  inheritance  taxes  are  not  deducti- 
ble.   The  Regulations  provide: 

"In  the  case  of  the  estates  of  residents,  the 
deductions  are  made  from  the  value  of  the  en- 
tire gross  estate,  wherever  situated.  The  deduc- 
tions specified  in  the  above  provisions,  contained 
in  the  Revenue  Act  of  1918,  are  proper  in  all 
cases  where  the  decedent  died  on  or  after  Febru- 
ary 25,  1919.  Where  the  decedent  died  prior  to 
February  25,  1919,  the  case  is  governed  by  the 
provisions  of  the  Revenue  Act  of  1916,  which 
permits  the  following  deductions: 

(1)  Funeral  expenses. 

(2)  Administration  expenses. 

(3)  Claims  against  the  estate. 

(4)  Unpaid  mortgages. 

(5)  Losses  from  casualty  or  theft. 

(6)  Support  of  decedent's  dependents. 

(7)  Other  charges  against  the  estate. 

(8)  Specific  exemption  of  $50,000. 

(9)  In  the  case  of  decedents  dying  after  De- 
cember 31,  1917,  public,  religious,  charitable, 
scientific,  literary,  and  educational  bequests. 


1.  Revenue  Act  of  1916,  Sec,  203   (a)    (1). 


118  FEDERAL  ESTATE  TAX. 

General  requirements  for  deduction. 

"The  provision  in  the  Revenue  Act  of  1916  for 
the  deduction  of  'such  other  charges'  than  those 
previously  specified  as  may  be  allowed  by  the 
laws  of  the  jurisdiction  is  omitted  in  the  Revenue 
Act  of  1918.  Consequently,  in  the  case  of  es- 
tates of  all  persons  dying  after  February  24, 
1919,  the  executor,  in  order  to  obtain  a  deduc- 
tion, must  bring  the  item  within  one  of  the 
classes  specifically  described."    (Art.  37.) 

§  128.  General  requirements  for  deduction. 
The  Regulations  provide: 

"In  order  to  be  deductible,  the  item  must  be 
of  the  character  described  in  the  statute ;  and  it 
must  also  be  one  the  payment  of  which  out  of 
the  estate  is  allowed  by  the  law  of  the  jurisdic- 
tion administering  it.  Where  the  item  is  not 
one  of  those  described,  it  is  not  deductible 
merely  because  payment  is  allowed  by  the  local 
law.  On  the  other  hand,  no  item  is  deductible 
unless  its  payment  is  so  allowed.  It  must  ap- 
pear in  every  case  either  that  payment  of  the 
item  has  been  made,  or  that  such  payment  is 
clearly  contemplated.  Where  the  amount  which 
may  be  expended  for  the  particular  purpose  is 
limited  by  the  local  law,  no  deduction  in  excess 
of  such  limitation  is  permissible.  Where  the 
local  courts  have  approved  the  expenditure  it 
will  ordinarily  be  allowed  for  deduction.  (See 
Art.  39.)  Where  the  disbursement  has  not  been 
made,  the  item  may  be  entered  for  deduction 


DEDUCTIONS.  119 


Decision  of  local  court. 


where  the  amount  is  certain,  and  it  appears  sat- 
isfactorily that  it  will  be  paid.  No  deduction 
may  be  taken  upon  the  basis  of  a  vague  or  un- 
certain estimate.  Where  an  uncertain  or  con- 
tingent liability,  not  allowed  as  a  deduction,  be- 
comes fixed,  and  payment  is  made,  the  remedy 
is  a  claim  for  a  refund  of  the  excess  tax."  (Art. 
38.  )2 

§  129.  Decision  of  local  court. 

A  question  which  must  continually  arise  is  the 

effect  to  be  given  to  the  decree  of  a  local  probate 

court.    The  .Regulations  treat  the  subject  as  follows: 

"The   decision   of   a   local   court   as   to   the 

amount  of  a  claim  or  administration  expense 

will    ordinarily   be    acceptd    where    the    court 

passes  upon  the  fact  upon  which  deductibility 

depends.    Where  the  court  does  not  pass  upon 

2.  The  ruling  that  all  deductions  must,  in  order  to  be  deduct- 
ible, be  allowed  by  the  local  law  was  first  laid  down,  with 
reference  to  the  Revenue  Act  of  1916  in  Treasury  Decision 
2453  (promulgated  March  7,  1917),  which  provides: 

"While  the  punctuation  and  construction  of  the  paragraph 
may  not  be  absolutely  conclusive  upon  this  point,  it  is  the 
opinion  of  this  office  that  the  limitation  set  up  in  the  con- 
cluding part  of  the  paragraph  applies  to  all  the  items  enumer- 
ated in  the  paragraph;  that  is,  there  could  not  be  deducted 
from  the  gross  estate  in  determining  the  net  estate  liable  to 
tax  any  funeral  or  other  expenses  or  any  losses  and  charges 
which  were  in  excess  of  the  amounts  allowable  under  the 
laws  of  the  local  jurisdiction  as  credits  to  administrators  or 
executors  in  their  accounts  in  the  probate  courts." 


120  FEDERAL  ESTATE  TAX. 

Decision  of  local  court. 

such  fact  its  decree  will,  of  course,  not  be  fol- 
lowed.3 For  example,  where  the  question  be- 
fore the  court  is  whether  a  claim  should  be  al- 
lowed, the  decree  allowing  it  will  ordinarily  be 
accepted  as  establishing  that  the  claim  is  valid 
and  the  amount  of  it.  Where,  however,  a  legacy- 
is  left  to  an  executor  in  lieu  of  commissions,  the 
allowance  of  the  legacy  does  not  establish  that 
the  executors  claim  for  commissions  is  equal  to 
the  amount  bequeathed,  and  that  this  amount 
is  consequently  deductible.  (See  Art.  42.)  Nor 
will  the  decree  necessarily  be  accepted  even 
where  it  purports  to  decide  the  fact  upon  which 
deductibility  depends.  It  must  appear  that  the 
court  actually  passed  upon  the  merits  of  the 
case.  This  will  be  presumed  in  all  cases  where 
there  is  an  active  and  genuine  contest.  Where 
the  result  reached  appears  to  be  unreasonable, 
this  is  some  evidence  that  there  was  not  such  a 
contest,  but  it  may  be  rebutted  by  proof  to  the 
contrary.  Where  the  decree  was  rendered  by 
consent,  it  will  be  accepted,  provided  the  con- 
sent was  a  bona  fide  recognition  of  the  validity 
of  the  claim — not  a  mere  cloak  for  a  gift — and 
was  accepted  by  the  court  as  satisfactory  evi- 

3.  Where,  for  instance,  a  local  court  grants  support  during 
the  settlement  of  the  estate  to  relatives  of  the  decedent  with- 
out reference  to  the  actual  needs  of  the  applicant,  it  is  ruled 
that  the  decree  is  of  no  importance  in  determining  whether  to 
allow  a  deduction  for  support,  since  the  Bureau  considers 
financial  necessity  to  be  a  condition  of  deduction. 


DEDUCTIONS.  121 


Funeral  expenses — Burial  plot,  monument,  etc. 


dence  upon  the  merits.  It  will  be  presumed  that 
the  consent  was  of  this  character,  and  was  so 
accepted,  where  it  is  made  by  all  parties  having 
an  interest  adverse  to  the  claim,  when  all  as- 
pects of  the  matter,  including  its  effect  upon 
taxation,  are  considered.  The  decree  will  not 
be  accepted  where  it  appears  to  be  at  variance 
with  the  law  of  the  State;  as,  for  example,  if  an 
allowance  is  made  to  an  executor  in  excess  of 
the  rate  prescribed  by  statute."     (Art.  39.) 

§  130.  Funeral  expenses. 
The  Regulations  provide: 

"An  executor  may  deduct  such  amounts  for 
funeral  expenses  as  are  actually  expended  by 
him,  provided  expenditures  of  this  nature  are 
a  liability  of  the  estate  under  the  laws  of  the 
local  jurisdiction.  A  reasonable  expenditure 
by  the  executor  for  a  tombstone,  monument  or 
mausoleum,  or  for  a  burial  lot,  either  for  him- 
self or  his  family,  may  be  deducted  under  this 
heading,  provided  such  an  expenditure  is  made 
a  charge  upon  the  estate  by  the  local  law.  In- 
cluded in  funeral  expenses  is  the  transportation 
of  the  person  bringing  the  body  to  the  place  of 
burial."     (Art.  40.) 

§  131.  Same — Burial  plot,  monument,  etc. 

The  cost  of  a  burial  plot,  designed  for  the  inter- 
ment not  only  of  the  decedent  but  of  the  members 


122  FEDERAL  ESTATE  TAX. 

Repair  of  graves — Special  rules. 

of  his  family,  is  allowed  as  a  deduction,  provided 
the  expense  is  chargeable  to  the  estate  of  the  dece- 
dent under  the  local  law.  The  same  is  true  of  a 
family  monument  or  mausoleum. 

§  132.  Same — Repair  of  graves. 

Deduction  is  also  permitted  of  a  reasonable 
amount  left  by  the  decedent  in  trust  for  the  repair 
and  upkeep  of  land  in  a  cemetery,  although  the 
direction  extends  to  the  graves  of  the  decedent's 
parents  as  well  as  his  own. 

§  133.  Same — Special  rules  in  Maryland  and  Dis- 
trict of  Columbia. 

It  has  been  ruled  that  the  special  provisions  of 
the  Maryland  Code  do  not  absolutely  restrict  the 
allowance  for  funeral  expenses  to  the  sum  of  $300, 
but  merely  limit  the  preference  of  the  debt  to  this 
amount;4  and  consequently  that  a  reasonable  dis- 
bursement may  be  deducted,  although  it  is  in  excess 
of  $300. 

In  the  District  of  Columbia,  on  the  other  hand,  it 
is  ruled  that  the  statute  forbids  the  allowance  under 
any  circumstances,  of  a  sum  in  excess  of  $600  for 
funeral  expenses,5  and  consequently  that  the  deduc- 
tion may  never  exceed  this  sum.  Up  to  this  amount, 
however,  a  reasonable  disbursement  will  be  allowed, 

4.  See  Annotated  Code  of  Maryland,  Art.  93,  Sees.  1,  4,  5; 
Art.  16,  Sec.  218. 

5.  Code  of  District  of  Columbia,  Sees.  356,  364. 


DEDUCTIONS.  123 


Administration   expenses — In  general. 


although  the  estate  is  being  administered  by  the 
residuary  legatee  under  a  special  bond  for  the  pay- 
ment of  debts  and  legacies,  and  it  is  consequently 
unnecessary  to  file  an  account.0 

§  134.  Administration  expenses — In  general. 
The  Regulations  provide: 

"The  amounts  deductible  from  the  gross 
estate  as  'administration  expenses'  are  such 
expenses  as  are  actually  and  necessarily  in- 
curred in  the  administration  of  the  estate;  that 
is,  in  the  collection  of  assets,  payment  of  debts, 
and  distribution  among  the  persons  entitled. 
The  expenses  contemplated  in  the  law  are  such 
only  as  attend  the  settlement  of  an  estate  by 
the  legal  representative  preliminary  to  the 
transfer  of  the  property  to  individual  bene- 
ficiaries or  to  a  trustee,  whether  such  trustee  is 
the  executor  or  some  other  person.  Expendi- 
tures not  essential  to  the  proper  settlement  of 
the  estate,  but  incurred  for  the  individual 
benefit  of  the  heirs,  legatees,  or  devisees,  may 
not  be  taken  as  deductions.  Administration 
expenses  include  (1)  executor's  commissions; 
(2)  attorney's  fees;  (3)  miscellaneous  ex- 
penses."   (Art.  41.) 

6.  See  Code  of  District  of  Columbia,  Sec.  264. 


324  FEDERAL  ESTATE  TAX. 

Commissions  of  executor. 

§  135.  Same — Commissions  of  executor. 

The  Regulations  provide: 

"No  amount  may  be  deducted  as  executor's 
commissions  in  excess  of  that  actually  paid  or 
to  be  paid,  and  in  no  case  in  excess  of  the 
amount  allowable  by  the  law  of  the  jurisdiction 
wherein  the  estate  is  being  administered.  If 
at  the  time  of  filing  the  return  the  commissions 
of  the  executor  have  not  been  allowed  or 
awarded  by  the  court  or  tribunal  having  juris- 
diction in  the  premises,  the  commissions  may 
nevertheless  be  entered  on  the  return  and 
claimed  as  a  deduction,  subject  to  future  allow- 
ance or  disallowance  by  the  Commissioner,  pro- 
vided: (1)  That  the  amount  entered  and 
claimed  is  within  the  amount  allowable  by  the 
laws  of  the  jurisdiction  wherein  the  estate  is 
being  administered;  (2)  that  such  amount  is  in 
accordance  with  the  usually  accepted  practice 
in  such  cases  within  said  jurisdiction;  and  (3) 
that  it  may  reasonably  be  expected  that  the  said 
amount  will  be  paid  within  one  year  and  180 
days  after  the  decedent's  death.  Except  in 
those  cases  in  which  the  commissions  have  been 
both  awarded  and  paid,  the  Commissioner  may 
at  any  time  require  the  executor  to  furnish 
satisfactory  evidence  of  his  right  to  take  or 
claim  the  deduction.  Whenever  it  shall  appear 
to  the  Commissioner  that  the  commissions 
claimed  but  not  awarded,  whether  paid  or  un- 


DEDUCTIONS.  125 


Bequest  in  lieu  of  commission. 


paid,  exceed  the  amount  allowed  by  law  or  ex- 
ceed the  amount  usually  allowed  within  the 
commonly  accepted  practice  of  the  jurisdiction 
wherein  the  estate  is  being  administered,  or 
where  in  any  case  the  Commissioner  finds  after 
the  lapse  of  1  year  and  180  days  after  the  dece- 
dent's death  that  the  commissions  have  not  been 
paid,  the  deduction  will  be  disallowed,  subject 
to  the  right  of  the  executor  thereafter  in  a 
proper  case  to  file  a  claim  for  abatement  or 
refund  as  he  may  be  advised,  when  the  com- 
missions shall  have  been  actually  awarded  and 
paid.  Where  the  executor  does  not  intend  to 
make  any  charge  upon  the  estate  for  his  ser- 
vices, no  deduction  may  be  claimed."  (Art. 
42.) 

§  136.  Same — Bequest  in  lieu  of  commission. 
The  Regulations  provide : 

"Where  a  bequest  is  made  to  an  executor  in 
lieu  of  commissions,  it  may  be  deducted  as  an 
administration  expense  only  to  an  amount 
thereof  not  in  excess  of  the  amount  allowable  as 
commissions  by  the  law  of  the  jurisdiction 
wherein  the  estate  is  being  administered.  If 
the  legacy  is  in  excess  of  such  allowable  com- 
missions, the  excess  may  not  be  deducted." 
(Art.  42.)8 

8.  Express  provision  to  this  effect  may  be  found  in  the 
statutes  of  some  of  the  states.  See,  for  instance,  Massachusetts 
(Acts,  1909,  Chap.  490,  Part  IV,  Sec.  8). 


126  FEDERAL  ESTATE  TAX. 

Trustee's  commission. 

In  order  that  the  bequest  may  furnish  the  basis 
for  a  deduction  it  must  result  in  an  actual  payment 
to  the  executor,  as  compensation  for  services.  It  is 
not  enough  that  he  received  an  incidental  benefit 
under  the  will,  as  through  a  bequest  to  his  wife,  or 
payment  for  services  other  than  those  pertaining  to 
the  duties  of  an  executor.  Should  the  legacy  be  less 
than  the  legal  compensation,  the  deduction  cannot 
exceed  the  amount  of  the  legacy. 

§  137.  Same — Trustee's  commission. 

This  is  held  not  to  constitute  an  "administration 

expense,"  and  consequently  to  be  non-deductible. 

The  Regulations  provide: 

"No  deduction  may  be  made  for  trustees' 
commissions,  and  an  executor  who  acts  as  trus- 
tee is  not  entitled  to  deduct  the  commission  he 
receives  for  his  services  in  the  latter  capacity. 
The  executor's  duties  are  complete  when  he  has 
turned  over  the  estate  or  the  proceeds  to  the 
persons  entitled  thereto.  Such  persons  may  be 
beneficiaries  entitled  to  receive  the  property  in 
their  own  right,  or  trustees  entitled  to  receive 
it  in  the  right  of  their  cestuis  que  trust.  The 
services  of  the  trustees  are  distinct  from,  and 
additional  to,  the  ordinary  duties  of  an  executor 
in  the  settlement  of  estates;  and  commissions 
for  such  trustees'  services  do  not  constitute  an 
expense  of  administration."     (Art.  42.) 


DEDUCTIONS.  12- 


Miscellaneous  rules — Attorney's  fees. 


§  138.  Same — Miscellaneous  rules. 
The  Regulations  provide : 

"  Where  commissions  not  actually  allowed 
are  deducted  upon  the  basis  of  reasonable  com- 
pensation, attention  should  be  given  to  the  size 
of  the  estate,  the  character  of  the  property,  the 
amount  of  work  performed  by  the  executor,  and 
the  commissions  allowed  in  the  case  of  similar 
estates.  The  value  of  the  real  estate  should 
not  be  taken  into  account  in  estimating  the  com- 
mission unless  it  has  actually  passed  through 
the  executor's  hands,  or  there  is  a  mandatory 
provision  in  the  will,  or  a  court  decree,  direct- 
ing its  sale,  and  commissions  are  allowed  by 
the  local  law. 

"Where  the  allowance  of  a  commission  is 
based  upon  services  in  relation  to  income  of 
the  estate,  as  well  as  principal,  the  entire  com- 
mission is  deductible."     (Art.  42.) 

§  139.  Attorneys'  fees. 
The  Regulations  provide : 

"No  amount  may  be  deducted  in  any  case  as 
attorney's  fees  in  excess  of  that  actually  paid 
or  to  be  paid.  If  at  the  time  of  filing  the  return 
the  attorney's  fees  have  not  been  allowed  or 
awarded  by  the  court  or  tribunal  having  juris- 
diction in  the  premises,  they  may  neverthelcss 
be  entered  on  the  return  and  claimed  as  a  deduc- 
tion, subject  to  future  allowance  or  disallow- 


128  FEDERAL  ESTATE  TAX. 

Attorney's  fees. 

ance  by  the  Commissioner,  provided:  (1)  That 
the  amount  so  entered  and  claimed  is  reason- 
able in  consideration  of  the  services  performed 
and  the  value  of  the  estate;  and  (2)  that  it  may 
reasonably  be  expected  that  such  amount  will 
be  paid  within  1  year  and  180  days  after  the 
decedent's  death.  Except  in  those  cases  in 
which  the  attorney's  fees  have  been  both 
awarded  and  paid,  the  Commissioner  may  at 
any  time  require  the  executor  to  furnish  satis- 
factory evidence  of  his  right  to  take  or  claim 
this  deduction.  Whenever  it  shall  appear  to 
the  Commissioner  that  the  fees  claimed  were 
not  awarded,  and  whether  paid  or  unpaid,  ex- 
ceed a  reasonable  amount  in  the  discretion  of 
the  Commissioner,  or  where  in  any  case  the 
Commissioner  finds  after  the  lapse  of  1  year 
and  180  days  after  the  decedent's  death  that 
the  fees  have  not  been  paid,  the  deduction  will 
be  disallowed,  subject  to  the  right  of  the  execu- 
tor thereafter,  in  a  proper  case  to  file  a  claim 
for  abatement  or  refund  as  he  may  be  advised, 
when  the  fees  have  actually  been  awarded  and 
paid.  The  cost  of  litigation  instituted  by  the 
beneficiaries  as  to  the  amount  of  their  respec- 
tive interests  may  not  be  deducted,  since  ex- 
penses of  this  character  are  properly  charges 
against  the  beneficiaries  personally,  rather  than 
against  the  general  estate."     (Art.  43.) 


DEDUCTIONS.  129 


Brokerage   fees — Miscellaneous   expenses. 

This  provision  conforms  the  practice  with  respect 
to  the  deduction  of  attorney's  fees  to  that  applied 
to  executors'  commissions.  The  revision  of  1919 
drew  a  distinction  between  the  two  cases,  in  that 
executors'  commissions  were  permitted  to  be  de- 
ducted only  upon  proof  that  an  account  had  been, 
or  would  be,  filed  in  the  probate  court, — a  condition 
not  made  in  the  case  of  attorneys'  fees  .  (See  infra, 
pp.  395-6.) 

§  140.  Brokerage  fees. 
The  Regulations  provide: 

"A  brokerage  fee  for  selling  property  of  the 
estate   is  deductible   where   the   sale   is   neces- 
sary in  order  to  pay  the  decedent's  debts,  or 
the    expenses    of   administration,    or    to    effect 
distribution."     (Art.  44.) 
This  rule  is  applied  to  cases  in  which  the  testator 
makes  a  specific  bequest  of  the  proceeds  of  the  sale 
of  real  property.    Where,  however,  the  sale  is  made 
by  the  heirs  or  devisees  after  the  decedent's  death, 
and  is  thus  not  a  part  of  the  administration  of  the 
estate,  the  expense  is  held  not  to  be  deductible. 

§  141.  Miscellaneous  expenses. 
The  Regulations  provide: 

"This  item  includes  expenses  incident  to 
court  proceedings,  or  the  administration  of  the 
estate,  such  as  court  costs,  surrogates'  fees, 
accountants'  fees,  appraisers'  fees,  clerk  hire, 
etc.      Expenses    necessarily    incurred    in    dis- 

9 


130  FEDERAL  ESTATE  TAX. 

Claims  against  the  estate — Special  local  requirements. 

tributing  the  estate  are  deductible.     This  in- 
cludes the  cost  of  storing  or  maintaining  prop- 
erty of  the  estate,  where  it  is  impossible  to 
effect    immediate    distribution    to    the    bene- 
ficiaries.    Expenses  for  preserving  and  caring 
for  the  property  may  be  deducted,  but  do  not 
include   additions   or  improvements;   nor   will 
such  expenses  be  allowed  for  a  longer  period 
than  the  executor  is  required  to  retain  the  prop- 
erty.    *     *     *     Other  expenses  attending  the 
sale   are   deductible,   such   as   the   fees   of   an 
auctioneer,  where  it  is  reasonably  necessary  to 
employ  one. ' '    ( Art.  44. ) 
The  expense  of  preserving  and  caring  for  prop- 
erty does  not  include  the  expense  of  keeping  open 
and  maintaining  the  decedent's  house  as  a  place  in 
which  to  live,  although  the  will  provides  for  this 
and  such  condition  is  to  continue  only  until  the  prop- 
erty can  be  sold.    The  expense  of  a  caretaker  would, 
however,  be  deductible  in  such  a  case. 

§  142.  Claims  against  the  estate — Special  local  re- 
quirements. 
The  Kegulations  provide: 

"The  amounts  that  may  be  deducted  under 
this  heading  are  such  only  as  represent  per- 
sonal obligations  of  the  decedent  existing  at 
the  time  of  his  death,  whether  then  matured  or 
not.  Obligations  contracted  by  the  executor 
are  not  deductible.     Only  such  claims  as  are 


DEDUCTIONS.  131 


Taxes  upon  property. 


actually  enforcible  against  the  estate  may  be 

deducted.".  (Art.  45.) 
Where  satisfactory  proof  is  made  of  the  exist- 
ence of  the  claim,  it  may  be  deducted  although  cer- 
tain special  provisions  of  the  local  law  have  not 
been  complied  with.  Thus,  where  the  local  statutes 
provide,9  that  the  claim  of  an  executor  or  admin- 
istrator against  the  estate  shall  not  be  paid  until 
there  has  been  a  special  allowance  thereof  by  the 
probate  court,  upon  notice  to  all  interested  parties, 
the  claim  of  the  executor,  if  clearly  established,  may 
be  deducted,  although  he  has  failed  to  take  the  steps 
specified,  by  reason  of  the  fact  that  he  is  the  sole 
beneficiary  of  the  estate,  and  consequently  not  in- 
terested in  establishing  the  status  of  a  creditor. 

§  143.  Taxes  upon  property. 

The  Regulations  provide : 

''Taxes  upon  real  property  should  be 
accrued  to  the  date  of  death.  This  is  done  by 
ascertaining  the  time  between  the  first  day  of 
the  taxable  period  wherein  the  death  occurs  and 
the  date  of  death,  and  computing  the  propor- 
tion of  the  entire  tax  which  this  period  bears 
to  the  entire  taxable  period.  Such  proportion 
of  the  tax  has  accrued  upon  the  date  of  death, 
and  is  deductible. 

''Taxes  upon   personal   property   are   either 

9.  As    in    Ohio:      Annotated    General    Code    of    Ohio,    Sees. 
10,727,  10,728. 


132  FEDERAL  ESTATE  TAX. 

Taxes  upon  property. 

wholly  deductible,  or  are  not  deductible  at  all, 
depending  upon  whether  the  tax  did,  or  did  not, 
become  the  personal  obligation  of  the  taxpayer 
in  his  lifetime.    If  the  tax  became  his  personal 
obligation  during  his  life,  the  whole  amount  is 
deductible  as  a  claim  against  his  estate.    If  it 
did  not  become  such  personal  obligation  in  his 
lifetime,  no  part  of  it  is  deductible.    The  ques- 
tion when  the  tax  became  the  personal  obliga- 
tion of  the  taxpayer  depends  upon  the  law  of 
the  jurisdiction  where  the  decedent  was  domi- 
ciled at  the  time  of  his  death.    Prima  facie,  the 
date  when  the  tax  became  the  personal  obliga- 
tion of  the  taxpayer  is  the  date  when  the  assess- 
ment was  laid."     (Art.  46.) 
This    regulation   marks    a    departure    from    the 
earlier  rule,10  which  treats  taxes  upon  real  and  per- 
sonal  property  in   the   same   way,   permitting  the 
deduction  of  the  entire  tax  if  the  tax  liability  ac- 
crued in  the  lifetime  of  the  decedent,  and  refusing 
any  deduction  if  it  accrued  after  his  death.     The 
application  of  these  rules,  particularly  in  the  case 
of  real  property,  is  difficult.     The  language  of  the 
various  State  statutes  differs  materially;  and  it  is 
often  doubtful  when  the  tax  becomes  a  lien  upon  the 
land,  or  a  personal  obligation  on  the  part  of  the  tax- 
payer.11 

10.  Laid  down  in  Treasury  Decision  2771 ;  Nov.  8,  1918. 

11.  See,   for  instance,   the   statutory   provisions   relating   to 
the   City   of  New   York,   and   contrast   the   decision   in   In  re 


DEDUCTIONS.  133 


Income  taxes. 


The  present  rule,  apportioning  the  tax  upon  real 
property,  presents  the  question  whether  it  runs 
counter  to  the  provision  in  the  statute  requiring  a 
deduction  of  a  "claim"  or  a  "charge"  against  the 
estate.12  That  is,  it  might  be  urged  that  the  statute, 
in  a  given  case,  required  the  deduction  of  the  entire 
amount,  without  reference  to  the  expiration  of  the 
period  for  which  the  tax  was  laid.  The  nuV 
adopted,  however,  is  probably  defensible  when 
taken  in  connection  with  the  valuation  of  the  prop- 
erty. The  question  presented  in  each  case  is  the 
market  or  sale  value  of  the  property  at  the  time  of 
the  decedent's  death,  and  this  is  ordinarily  deter- 
mined between  buyer  and  seller  upon  the  basis  of 
the  amount  of  tax  which  had  accrued  at  the  date  of 
the  sale.  The  land  is  valued,  and  the  accrued  tax 
is  charged  to  the  seller  and  deducted  from  the 
price.  In  this  way,  the  rule  laid  down  in  the  Regu- 
lations is  actually  applied.  The  deduction  of  the 
entire  tax  would  be  reflected  in  a  corresponding  in- 
crease in  the  valuation  of  the  property. 

§  144.  Income  taxes. 

The  statute  is  explicit  in  refusing  deduction  of 
the  tax  upon  income  received  after  the  decedent's 

Babcock  (115  N.  Y.  450;  22  N.  E.  Rep.  263)  with  that  in  In  re 
Freund's  Estate  (143  A.  D.  335,  128  N.  Y.  Supp.  48;  affd.  on 
opinion  below,  202  N.  Y.  556,  95  N.  E.  Rep.  1129. 

12.  As  already  stated,  the  word  "charge"  is  omitted  from 
the  Revenue  Act  of  1918. 


134  FEDERAL  ESTATE  TAX. 

Death  duties. 

death.  This  prohibition  does  not  extend  to  the  tax 
upon  income  received  during  the  life  time  of  the 
decedent.  On  the  contrary,  the  plain  implication 
is,  that  the  tax  upon  such  income  is  deductible;  and 
the  Bureau  so  rules,  holding  that,  "In  the  case  of 
federal  taxes  upon  income,  the  tax  upon  income 
received  or  accrued  during  the  decedent's  life  con- 
stitutes the  personal  obligation  of  the  decedent,  and 
is  deductible.13 

§  145.  Death  duties. 

The  statute  is  explicit  in  refusing  the  deduction 
of  "any  estate,  succession,  legacy  or  inheritance 
taxes."  This  provision  sets  at  rest,  as  to  the  estates 
of  persons  dying  after  February  24,  1919,  a  much 
vexed  question.  Where  the  decedent  died  before 
that  date,  and  the  case  is  consequently  governed  by 
the  Revenue  Act  of  1916,  the  question  is  in  a  con- 
fused and  unsatisfactory  state.  The  history  of  the 
various  rulings  is  as  follows: 

The  Bureau  first  ruled  that  State  inheritance 
taxes  should  be  deducted  as  a  "charge  against  the 


13.  Regulations,  Art.  46.  That  the  ordinary  income  tax 
constitutes  a  personal  obligation  of  the  taxpayer,  and  is  con- 
sequently a  claim  against  the  estate,  see  Brady  v.  Anderson, 
240  Fed.  Rep.  665,  667-8.  A  ruling  has  been  made  under  the 
Massachusetts  Income  Tax  Act  (Gen.  Acts,  1916,  Chap.  269, 
Sec.  1)  permitting  the  deduction  of  the  tax  paid  on  income 
received  during  the  decedent's  life  in  1917  and  subsequent 
years. 


DEDUCTIONS.  135 


Probate  duties. 


estate."14     This  ruling  was  subsequently  revoked, 
and  such  taxes  were  held  not  to  be  deductible.15 

§  146.  Same — Probate  duties. 

As  the  language  used  in  Treasury  Decision  2524 
indicates,  the  refusal  to  deduct  inheritance  taxes 
extends  only  to  the  case  of  the  ordinary  legacy  or 
inheritance  tax,  imposed  upon  individual  legacies 
from  the  decedent  or  distributive  shares  in  his 
estate.  The  ruling  has  never  been  extended  to  pro- 
bate duties,  levied  against  the  estate  as  a  whole. 
On  the  contrary,  the  Bureau  has  ruled  consistently 
that  such  duties  are  deductible  under  the  Revenue 
Act  of  1916.    It  has  been  so  ruled  with  reference  to 

14.  Treasury  Decision  2395;  Nov.  17,  1916.  The  following 
language  was  used : 

"Since  it  does  not  appear  open  to  question  that  State  inherit- 
ance taxes  are  a  primary  charge  against  an  estate  and  allowable 
as  credits  to  executors  and  administrators  in  every  State  im- 
posing such  taxes,  they  are  clearly  deductible  from  the  gross 
estate." 

15.  Treasury  Decision  2524;  Sept.  10,  1917.  This  Treasury 
Decision  contains  little  or  nothing  in  the  way  of  argument. 
It  is  said : 

"An  exhaustive  study  of  the  nature  of  State  inheritance 
taxes  has  led  this  office  to  the  conclusion  that  amounts  paid  to 
States  on  account  of  inheritance,  succession,  or  legacy  taxes 
are  not  'such  other  charges  against  the  estate  as  are  allowed 
by  the  laws  of  the  jurisdiction,'  and  accordingly  are  not  deduct- 
ible in  arriving  at  the  amount  of  Federal  estate  tax.'  " 

Treasury  Decision  2395  is  revoked. 


136  FEDERAL  ESTATE  TAX. 

Succession  taxes — Court  decisions. 

the  British  Estate  Duty,16  a  duty  imposed  by  the 
laws  of  the  New  South  Wales  for  the  privilege  of 
administering  personal  property  of  the  decedent 
situated  in  Australia,17  and  a  duty  imposed  by  the 
laws  of  British  India  as  a  condition  of  the  transfer 
of  stock  in  corporations  organized  under  the  laws  of 
that  country  upon  the  death  of  the  owner.18 

§  147.  Succession  taxes — Court  decisions. 

As  to  the  ordinary  legacy  or  succession  tax,  how- 
ever, the  policy  of  the  Bureau,  ever  since  the  pro- 
mulgation of  Treasury  Decision  2524,19  has  been  to 
refuse  deduction.  A  decision  adverse  to  this  posi- 
tion, however,  has  been  rendered  with  reference  to 
the  collateral  inheritance  tax  of  Pennsylvania,  hold- 
ing it  to  be  deductible  as  a  charge  against  the  estate 
under  the  Revenue  Act  of  1916. 20  The  Bureau  has 
accepted  this  decision  as  conclusive,  both  with  ref- 

16.  Imposed  by  the  Finance  Act  of  1894  (57  and  58  Vict., 
Chap.  30),  upon  the  passage  of  the  estate  as  a  whole,  at 
graduated  rates.  This  tax  is  of  the  same  general  character 
as  the  Federal  Estate  Tax. 

17.  Statutes  of  New  South  Wales,  1899,  No.  27. 

18.  Act  No.  VII,  passed  by  the  Governor-General  of  India 
in  Council,  known  as  the  "Succession  Certificate  Act,  1889." 

19.  On  Sep.  10,  1917. 

20.  Northern  Trust  Co.  v.  Lederer,  257  Fed.  Rep.  812;  affd. 
sub  nom.  Lederer  v.  Northern  Trust  Co.,  262  Fed.  Rep.  52.  The 
latter  decision  (of  the  Circuit  Court  of  Appeals  for  the  Third 
Circuit)  was  rendered  on  January  7,  1920;  and  on  March  3, 
]920,  the  Supreme  Court  denied  an  application  for  a  writ  of 
certiorari. 


DEDUCTIONS.  137 

Succession  taxes — Court  decisions. 


erence  to  t ho  collateral  inheritance  tax  directly  in- 
volved in  the  decision,21  and  the  tax  subsequently 
imposed  in  Pennsylvania  upon  lineal  descendants  of 
the  decedent.22 

The  decision  in  Lederer  v.  Northern  Trust  Com- 
pany, however,  has  application  only  to  the  Pennsyl- 
vania inheritance  tax;  and  the  Bureau  has  refused 
to  accept  it  as  a  precedent  in  other  States.  This 
refusal  is  evidently  based  upon  the  theory  that  the 
Pennsylvania  tax  is  not  the  ordinary  legacy  or  suc- 
cession tax,  but  rather  an  estate  tax  or  probate 
duty,  or  at  least  that  the  Pennsylvania  courts  have 
so  decided.  And  the  reasoning  of  the  court  in  the 
case  cited  supports  this  theory.23 

Thus,  in  general,  the  ruling  of  the  Bureau  con- 
tinues at  the  present  time  to  be  what  it  was  before, 
namely,  that  the  ordinary  legacy  or  succession  tax 
is  not  deductible,  either  under  the  Revenue  Act  of 
1916  or  under  the  Revenue  Act  of  1918.  And  this 
ruling,  has,  in  reference  to  the  inheritance  tax  of 
New  York,  received  judicial  sanction.24 

21.  Act  of  May  6,  1887;  1  Purdon's  Digest,  p.  603  et  seq. 

22.  Act  of  July  11,  1917,  Laws  1917,  No.  318,  p.  832. 

23.  See  262  Fed.  Rep.,  pp.  54-5,  where  the  court  cites  expres- 
sions of  the  Pennsylvania  courts  indicating  that  the  tax  is  im- 
posed upon  the  estate  as  a  whole. 

24.  New  York  Trust  Co.  v.  Eisner,  263  Fed.  Rep.  620;  Dis- 
trict Court,  S.  D.  N.  Y.,  Mack,  J.,  Jan.  19,  1920.  On  the  other 
hand,  there  is  a  decision  to  the  contrary,  holding  that  the  New 
York  tax  is  deductible  in  ascertaining  the  net  estate  under  the 
federal  estate  tax  law.     See  Sayre  v.  Brewster;  U.  S.  Dist.  Ct., 


138  FEDERAL  ESTATE  TAX. 

Deduction  by  the  States  of  the  federal  tax. 

§  148.  Deduction  by  the  States  of  the  federal  tax. 

The  question  of  the  deductibility  of  the  federal 
tax  in  computing  inheritance  taxes  under  the  laws 
of  the  various  States  does  not  come  strictly  within 
the  scope  of  this  work.  The  practice  of  the  States, 
however,  is  interesting  as  indicating  the  general 
policy  in  such  matters.    Each  State  court,  of  course, 

N.  D.  of  N.  Y.;  Ray,  J.  See  War  Tax  Service,  Corporation 
Trust  Co.,  1921,  pars.  309-10. 

See,  as  possibly  tending  to  support  the  refusal  to  deduct  State 
inheritance  taxes,  Prentiss  v.  Eisner  (267  Fed.  Rep.  16),  holding 
that  the  New  York  tax  is  not  deductible  by  a  legatee  for  income 
tax  purposes,  under  a  statute  permitting  the  deduction  of 
"taxes"  (Act  of  Oct.  3,  1913;  38  Stat.  166,  Chap.  16,  par.  D.). 
That  is,  the  individual  legatee  does  not  pay  the  ' '  tax. ' '  Quaere, 
whether  it  follows  that  the  estate  does  not  pay  it. 

In  New  York  Trust  Company  v.  Eisner,  Judge  Mack  refers 
to  the  decision  in  Northern  Trust  Company  v.  Lederer,  and 
distinguishes  it  upon  the  ground  that  the  Pennsylvania  tax 
was,  or  was  held  to  be,  an  estate  tax  or  a  probate  duty,  rather 
than  the  ordinary  legacy  or  succession  tax  (263  Fed.  Rep. 
622).  As  an  original  proposition,  it  is  not  easy  to  see  such  a 
radical  difference  in  the  New  York  and  Pennsylvania  statutes 
as  would  warrant  a  difference  in  treatment.  The  Pennsylvania 
statute  does,  it  is  true,  provide  that  "All  estates  •  *  • 
passing  •  *  *  shall  be  subject  to  a  tax  *  *  *";  but 
it  is  provided  that  this  tax  shall  be  apportioned  among  the 
individual  legatees  or  distributees,  and  that  the  executor  or 
administrator  shall  deduct  from  each  legacy  or  distributive 
share  the  tax  with  respect  thereto.  Act  of  May  6,  1887,  Sec.  5; 
1  Purdon's  Digest,  p.  606. 

There  is,  however,  at  least  one  state,  Rhode  Island,  which 
has  a  true  estate  tax  analogous  to  the  English  and  Federal 
Taxes.    See  Public  Laws,  1916,  Chap.  1339,  Sees.  1,  2,  3,  4. 


DEDUCTIONS.  139 


Deduction  by  the  States  of  the  federal  tax. 

has  its  individual  question  to  consider,  depending 
upon  the  language  of  the  particular  statute.  The 
general  tendency  is  to  permit  the  deduction  of  the 
federal  tax,  either  as  an  administration  expense,25 
or  upon  the  ground  that  the  "clear  value"  or  "clear 
market  value"  of  the  property  transferred  (made 
by  the  statute  the  basis  of  tax)  can  be  ascertained 
only  after  the  federal  tax  is  paid.26 

In  New  York,  on  the  other  hand,  the  deduction  is 
refused.27  Both  of  the  New  York  decisions  cited  are 
based  largely  upon  Matter  of  Gihon,28  which  holds 
that  the  tax  imposed  by  the  Federal  War  Revenue 
Act  of  June  13, 1898,29  is  not  deductible  in  computing 
the  State  inheritance  tax.  The  Act  of  1898,  however, 
imposes  the  ordinary  tax  upon  individual  legacies  or 
distributive  shares.  In  this  respect  it  is  wholly  dif- 
ferent from  the  estate  tax  of  1916.30    The  reasoning 

25.  Corbin  v.  Townshend,  92  Conn.  501,  103  Atl.  Rep.  647; 
People  v.  Pasfield,  284  111.  450,  120  N.  E.  Rep.  286;  People  v. 
Northern  Trust  Co.,  289  111.  475,  124  N.  E.  Rep.  662. 

26.  State  ex  rel.  Smith  v.  Probate  Court,  130  Minn.  210,  166 
N.  W.  Rep.  125;  People  v.  Pasfield,  supra;  In  re  Knight's 
Estate,  261  Pa.  St.  537,  104  Atl.  Rep.  765;  In  re  Roebling's 
Estate,  104  Atl.  Rep.  295  (N.  J.). 

27.  Matter  of  Bierstadt,  178  App.  Div.  836,  166  N.  Y.  Supp. 
168;  Matter  of  Sherman,  179  App.  Div.  497,  166  N.  Y.  Supp. 
19;  affd.  222  N.  Y.  540,  118  N.  E.  Rep.  1078. 

28.  Matter  of  Gihon,  169  N.  Y.  443,  62  N.  E.  Rep.  561. 

29.  30  Stat.  464. 

30.  See  In  re  Hamlin,  226  N.  Y.  407,  124  N.  E.  Rep.  4; 
Plunkett  v.  Old  Colony  Trust  Co.,  233  Mass.  471,  124  N.  E. 
Rep.  265. 


140  FEDERAL  ESTATE  TAX. 

Deduction  by  the  States  of  the  federal  tax. 

in  the  Bierstadt  case  is  to  the  effect  that  either  the 
two  acts  are  similar  for  deduction  purposes,  or  the 
latter  act  is  a  direct  property  tax,  unapportioned 
and  consequently  unconstitutional.31  This  seems  to 
be  a  non  sequitur.  The  tax  might  be  an  indirect 
tax,32  and  yet  differ  radically  from  a  tax  upon 
individual  legacies  or  distributive  shares.  Quaere, 
how  far  the  fact  that  the  basis  of  tax  under  the 
Federal  Act  of  1916  is  the  transfer  of  the  entire  net 
estate  ought  logically  to  affect  deductibility  under 
the  inheritance  tax  laws  of  New  York.  The  Sherman 
case  does  not  use  the  argument  advanced  in  the 
Bierstadt  case;  and  the  substituted  reasoning  is  far 
from  clear.33 

Massachusetts  takes  issue  with  New  York  even  as 
to  the  deductibility  of  the  Federal  Tax  of  1898,  hold- 
ing that  it  is  deductible  under  the  Massachusetts 
inheritance  tax  statute,34  which  does  not  seem  to 
differ  from  the  New  York  statute  sufficiently  to 
warrant  a  different  rule. 

According  to  the  decided  weight  of  authority,  the 
federal  tax  imposed  by  the  Revenue  Act  of  1916  is 
deductible  in  determining  inheritance  taxes  in  the 
various  States.  The  most  satisfactory  rule  would 
probably  be  for  the  States  to  permit  the  deduction 
of  the  federal  tax,  and  Congress  the  deduction  of 

31.  178  App.  Div.  837. 

32.  As  to  which  see  supra. 

33.  See  179  App.  Div.  502-4. 

34.  Hooper  v.  Shaw,  176  Mass.  190,  57  N.  E.  Rep.  361. 


DEDUCTIONS.  141 


Unpaid  mortgages. 


the  various  State  taxes.  To  a  considerable  extent 
this  rule  did  obtain  under  the  Revenue  Act  of  1916. 
It  did  not  wholly  obtain,  however;  and  in  the 
Revenue  Act  of  1918  Congress  explicitly  refuses  to 
permit  the  various  State  taxes  to  be  deducted. 

§  149.  Unpaid  mortgages. 
The  Regulations  provide: 

"The  full  amount  of  unpaid  mortgages  on 
property   included  in  the  gross   estate   should 
be  deducted  under  this  heading,  including  in- 
terest which  had  accrued  at  the  time  of  death, 
whether  payable  at  that  time  or  not.    Interest 
should  be  computed  upon  the  basis  of  365  days 
to  the  year.    The  full  value  of  the  real  estate, 
without  any  deduction  for  mortgages,  must  be 
returned  as  part  of  the  gross  estate.    As  real 
property  situated  outside  of  the  United  States 
is  not  part  of  the  gross  estate,  the  amount  of 
mortgages    upon     such    property    should    be 
deducted   only   where    the    decedent   was    per- 
sonally liable  for  the  mortgage  debt."     (Art. 
47.) 
The  statute  provides  for  the  deduction  of  "un- 
paid mortgages,"  without  reference  to  the  character 
of  the  mortgaged  property.    Inasmuch,  however,  as 
it  is  ruled  that  real  property  not  situated  in  the 
United  States  forms  no  part  of  the  gross  estate,35 
it  is  clearly  a  reasonable  rule  to  restrict  the  deduc- 

35.  Regulations,  Art.  13. 


142  FEDERAL  ESTATE  TAX. 

Losses  from  casualty  or  theft. 

tion  to  mortgages  upon  real  property  in  this 
country,  unless  the  mortgage  debt  is  a  personal 
obligation  of  the  decedent,  payable  out  of  his 
estate.36 

§  150.  Losses  from  casualty  or  theft. 
The  Regulations  provide: 

"There  may  be  deducted  under  this  heading 
losses  incurred  during  the  settlement  of  the 
estate  arising  from  fires,  storms,  shipwreck,  or 
other  casualty,  or  from  theft,  when  such  losses 
are  not  compensated  by  insurance  or  otherwise. 
If  the  loss  is  partly  compensated,  the  excess  of 
the  loss  over  such  compensation  may  be 
deducted.  Losses  not  of  the  nature  described 
are  not  deductible.  Losses  sustained  by  reason 
of  depreciation  in  the  value  of  the  assets  of  the 
estate  subsequent  to  the  decedent's  death  are 
not  deductible.  The  term  'casualty'  includes 
only  losses  of  a  fortuitous  and  unusual  char- 
acter, such  as  result  from  violence,  or  from  a 
disaster  which  could  not  be  foreseen  or  pre- 

36.  If  the  refusal  to  deduct  mortgages  on  real  property 
situated  outside  of  this  country  (in  the  absence  of  a  personal 
liability  on  the  part  of  the  decedent)  reads  into  the  statute 
something  not  expressly  stated,  the  same  is  probably  true  of 
the  Regulation  excluding  from  the  gross  estate  real  property 
owned  by  a  resident,  but  situated  in  other  countries.  The 
latter  rule  was  adopted  in  deference  to  an  ancient  and  deep- 
rooted  theory  that  such  property  is  subect  to  tax,  directly  or 
indirectly,  only  by  the  jurisdiction  in  which  it  is  situated. 


DEDUCTIONS.  143 


Support  of  dependents — Authorization  by  local  law. 

vented    by    the    exercise    of    reasonable    care. 
Losses  due  to  the  death  of  animals  from  disease 
are  deductible.    In  order  to  be  deductible  a  loss 
must  occur  during  the  settlement  of  the  estate. 
Where  property  has  been  delivered  to  the  bene- 
ficiary,  settlement  has  been   effected,   and   no 
deduction  may  be  had  for  loss  of  the  property." 
(Art.  48.) 
In  accordance  with  these  provisions  it  has  been 
ruled  that  loss  resulting  from  the  fall  of  a  silo,  due 
to  insufficient  reinforcing  material,  is  deductible. 

§  151.  Support   of   dependents  —  Original   rules  — 
Authorization  by  local  law. 
The  Regulations  of  1919  lay  down  four  conditions 
with  reference  to  the  allowance  of  a  deduction  for 
support,  the  first  of  which  is  that: 

1  'In   order  to  be  deductible,   the   allowance 
must  be  authorized  by  the  laws  of  the  jurisdic- 
tion in  which  the  estate  is  being  administered; 
and   no    sum   is    deductible   in    excess    of   the 
amount    so    authorized,    whether    actually    ex- 
pended or  not."     (Art.  49,  par.  [1].) 
Provision  by  the  local  law  for  support  during  the 
settlement  of  the  estate  is  a  condition  precedent  to 
deduction.    Thus,  where  the  local  law37  provides  for 
support  only  where  the  husband  leaves  no  will  or 
the  widow  dissents  from  the  provisions  of  the  will, 

37.  As  in  Tennessee:  See  Thompson's  Shannon's  Code,  Sec. 
4020. 


144  FEDERAL  ESTATE  TAX. 


Support  must  be  money. 


a  deduction  will  not  be  allowed  where  the  husband 
leaves  a  will  and  the  widow  takes  under  it. 

Where,  however,  the  local  law  provides  for  sup- 
port, it  is  ruled  that  it  is  not  an  obstacle  to  deduc- 
tion that  the  will  provides  for  the  payment  of  the 
income  of  the  estate  to  the  widow,  and  the  local 
court  adopts  this  provision,  and  directs  such  pay- 
ment during  the  settlement  of  the  estate,  instead  of 
making  some  other  provision.  Similarly,  it  is  ruled 
that  where  the  will  directs  the  payment  of  a  certain 
sum  to  the  wife  during  the  settlement  of  the  estate, 
and  this  payment  is  made  and  allowed  to  the  execu- 
tor in  his  final  account,  the  amount  is  deductible, 
although  there  was  no  special  application  for  an 
allowance  or  special  order  with  respect  thereto. 

§  152.  Same — Support  must  be  money. 
The  Regulations  provide: 

"The  only  subject  for  deduction  is  money 
thus  allowed  and  paid.  The  turning  over  of 
furniture  or  other  personal  property,  although 
under  the  authority  of  a  statute,  is  not  a  proper 
subject  for  deduction."  (Art.  49,  par.  [2].) 
This  ruling  accords  with  the  natural  meaning  of 
the  language  used,  namely,  "such  amounts,"  etc.38 

38.  The  question  is  treated  more  fully  in  an  earlier  Treasury 
Decision,  promulgated  under  the  Revenue  Act  of  1916. 
(Treasury  Decision  2531;  Oct.  4,  1917.)  This  decision  uses 
the  following  language:  "In  view  of  the  language  of  the 
taxing  act,  there  must   be   an  actual  expenditure   of  money — 


DEDUCTIONS.  14.3 


Persons  supported  must  be  actually  dependent. 

§  153.  Same — Persons  supported  must  be  actually 
dependent. 
The  Regulations  provide: 

"The  amount  sought  to  be  deducted  must  be 
reasonably  required  for  support.  This  means 
that  the  alleged  dependent  shall  actually  re- 
quire the  allowance  for  his  support.  Mere  re- 
lationship to  the  decedent  is  not  enough.  A 
person  is  not  dependent  where  he  has  means  of 
his  own  sufficient  to  support  him  according  to 
his  station  in  life.  This  implies,  however,  the 
possession  of  income,  either  from  property  or 
earnings,  sufficient  to  support  him  according  to 
his  scale  of  living  at  the  time  of  the  decedent's 
death.  A  person  is  not  removed  from  the  de- 
pendent class  by  the  possession  of  property, 
which  he  might  sell  or  mortgage.  Where  a  per- 
son is  thus  dependent  at  the  time  of  the  allow- 
ance, it  does  not  affect  the  deduction  that  he 
subsequently  comes  into  the  possession  of 
money  or  property,  through  the  distrubution  of 

not  a  mere  delivery  to  the  dependent  by  the  executor  of  house- 
hold goods  or  other  miscellaneous  personalty  of  that  character. 
It  is  obvious  that  the  turning  over  of  furniture  and  such  per- 
sonalty to  the  dependent  does  not  contribute  to  that  depend- 
ent's support  unless  the  furniture  is  sold  and  the  proceeds 
are  so  used.  Therefore,  provisions  in  the  statutes  of  the 
various  States  to  the  effect  that  the  widow  is  entitled  to 
family  pictures,  wearing  apparel,  etc.,  and  to  certain  household 
goods  in  lieu  of  an  award,  has  reference  to  the  widow's  ex- 
emption and  has  no  application  in  determining  the  deduct- 
ibility of  an  amount  paid  for  the  support  of  dependents." 
10 


146  FEDERAL  ESTATE  TAX. 

What  necessary  to  negative  dependence. 

the  estate  or  otherwise.  The  whole  amount  of 
the  allowance  is  deductible,  whether  paid  in  one 
sum  or  in  installments."  (Art.  49,  par.  [3]). 
Whether  the  words  ' '  those  dependent  upon  the  de- 
cedent" contained  in  the  statute,  in  connection  with 
the  reference  to  the  local  law,  indicate  actual  need 
of  money,  as  distinguished  from  relationship  to  the 
decedent,  is  probably  a  serious  question.  Provisions 
for  temporary  support  during  the  settlement  of  the 
estate  are  common  in  the  various  States,  and  the  al- 
lowance is  often  made  without  reference  to  the  finan- 
cial condition  of  the  applicant.  This  was  the  system 
with  reference  to  which  Congress  was  legislating; 
and  the  intention,  at  least  in  the  Revenue  Act  of 
1916,  was  probably  to  permit  the  deduction  where- 
ever  the  State  law  granted  the  allowance.  The 
Bureau  rulings  have,  however,  throughout  been  to 
the  contrary,  insisting  upon  actual  financial  neces- 
sity.39 This  position,  taken  under  the  Revenue  Act 
of  1916,  is,  however,  much  strengthened  by  the  lan- 
guage of  the  Revenue  Act  of  1918,  which  provides 
that  the  amount  sought  to  be  deducted  must  be  "rea- 
sonably required  and  actually  expended"  for  the 
support  of  the  dependents.    These  words  are  new. 

§  154.  Same — What  necessary  to  negative  depend- 
ence. 

Although  the  Regulations  speak  of  "income"  as 
a  factor  determining  whether  the  person  is  depend - 

39.  See  Treasury  Decision  2531,  par.  second;  Oct.  4,  1917 


DEDUCTIONS.  147 

Time  for  determining  dependency. 

ent  or  not,  the  character  of  money  in  hand,  as  con- 
stituting "income"  or  "capital,"  is  treated  as  im- 
material. The  distinction  taken  is  between  money  in 
hand,  which  is  actually  available  for  support,  and 
which  it  is  deemed  reasonable  that  the  person  shall 
apply  to  this  purpose,  and  property,  which  it  would 
be  necessary  to  sell  or  mortgage,  and  which  is  con- 
sequently not  deemed  applicable  to  the  support  of 
the  otherwise  dependent  person. 

§  155.  Same — Time  for  determining  dependency. 

This  is  fixed  as  being  the  time  of  the  making  of 
the  allowance.  On  this  point  the  statute  is  not  ex- 
plicit. The  alternative  theory  would  apparently  be 
to  take  the  date  of  the  death  as  the  time  for  determ- 
ining dependency.  The  statute  does  not  say  this, 
and  many  of  the  other  deductions  are  determined 
by  occurrences  after  the  death.  The  possibility  of 
discrimination,  due  to  the  precise  time  of  the  receipt 
of  money,  is  one  which  would  exist  whatever  date 
were  taken  for  determining  the  question.  The  prin- 
cipal contingency  after  death  is  probably  the  receipt 
of  insurance  money  on  policies  taken  out  by  the  de- 
cedent. Such  claims,  if  valid,  are  usually  paid  at 
once.  If  payment  were  deliberately  postponed  in 
order  to  secure  a  deduction  not  otherwise  obtain- 
able, the  deduction  might  perhaps  be  refused.  Ap- 
parently no  such  case  has  arisen. 


148  FEDERAL  ESTATE  TAX. 

Expenditure  of  the  money — Present   rules. 

§  156.  Same — Expenditure  of  the  money. 

The  Regulations  provide: 

"The  money  must  be  actually  expended  for 
support.  This  means  that  the  executor  or  ad- 
ministrator must  pay  it  to  the  persons  entitled. 
After  the  payment  has  been  made,  the  deduction 
of  the  sum  is  proper,  and  is  not  affected  by  the 
fact  that  the  dependents  do  not  use  the  whole 
of  it  during  the  period  of  administration." 
(Art.  49,  par.  [4]). 

§  156-a.  Present  rules. 

The  Regulations  now  provide : 

"The  support  during  the  settlement  of  the 
estate  of  dependents  of  the  decedent  should  be 
deducted,  but  pursuant  to  the  following  rules: 

(1)  In  order  to  be  deductible,  the  allowance 
must  be  authorized  by  the  laws  of  the  jurisdic- 
tion in  which  the  estate  is  being  administered, 
and  not  in  excess  of  what  is  reasonably  re- 
quired. 

(2)  The  allowance  for  which  deduction  may  be 
made  is  limited  to  support  during  the  settle- 
ment of  the  estate.  Any  allowance  for  a  more 
extended  period  is  not  deductible. 


DEDUCTIONS.  148a 


Present  rules. 


(3)  There  must  be  an  actual  disbursement 
from  the  estate  to  the  dependents,  hut  after 
payment  has  been  made,  the  right  of  deduction 
is  not  affected  by  the  fact  that  the  dependents 
did  not  expend  the  entire  amount  for  their  sup- 
port during  the  settlement  of  the  estate." 
(Art.  49.) 

The  effect  of  the  amendment  upon  the  four  rules 
previously  set  out  appears  to  be  as  follows: 

(1)  Necessity  of  authorization  by  local  lair. — 
This  rule  is  in  no  way  affected. 

(2)  Support  must  be  money. — There  is  nothing 
specific  on  this  point;  and  apparently  the  allow- 
ance of  anything  actually  tending  to  support,  such 
as  flour  or  other  supplies,  might  suffice.  Quaere. 
as  to  furniture  or  similar  personalty.  There  is  a 
prior  adverse  ruling  with  reference  to  such  articles. 
(See  T.  D.  2531,  p.  288.) 

(3)  Actual  dependence  necessary. — This  rule  is 
not  stated  as  explicitly  as  in  the  earlier  revision. 
It  is  merely  required  that  the  amount  shall  be  "not 
in  excess  of  what  is  reasonably  required."  This 
may  possibly  have  the  same  result;  but  the  ten- 
dency to  curtail  the  former  explicit,  and  somewhat 
doubtful,  ruling  is  noteworthy. 


148b  FEDERAL  ESTATE  TAX. 

Present  rules — Property  previously  taxed. 

(4)  Actual  disbursement  by  estate. — The  neces- 
sity of  this  is  expressly  provided ;  also  that  it  is  not 
necessary  that  the  dependents  expend  the  money 
during  the  settlement  of  the  estate. 

§  157.  Property  previously  taxed. 

The  statute  provides  for  the  deduction  from  the 
estate  of  a  resident  of: 

"An  amount  equal  to  the  value  at  the  time  of 
the  decedent's  death  of  any  property,  real,  per- 
sonal, or  mixed,  which  can  be  identified  as  hav- 
ing been  received  by  the  decedent  as  a  share  in 
the  estate  of  any  person  who  died  within  five 
years  prior  to  the  death  of  the  decedent,  or 
which  can  be  identified  as  having  been  acquired 
by  the  decedent  in  exchange  for  property  so  re- 
ceived, if  an  estate  tax  under  the  Revenue  Act 
of  1917  or  under  this  Act  was  collected  from 
such  estate,  and  if  such  property  is  included  in 
the  decedent's  gross  estate."  (Sec.  403  [a] 
[2]). 

The  Regulations  provide: 

"There  may  be  deducted  from  the  gross  es- 
tate under  this  heading  an  amount  equal  to  the 
value  at  the  time  of  the  decedent's  death  of  any 
property  which  can  be  identified  as  having  been 
received  by  him  as  a  share  in  the  estate  of  any 
person  who  died  within  five  years  prior  to  the 


DEDUCTIONS.  149 


Property  previously   taxed. 


decedent's  death,  if  an  estate  tax  under  the 
Revenue  Act  of  1917  or  the  Revenue  Act  of  1918 
was  collected  from  such  estate.  There  may  also 
be  deducted  an  amount  equal  to  the  value  of 
property  which  can  be  identified  as  having  been 
acquired  by  the  decedent  in  exchange  for  prop- 
erty received  as  a  share  in  the  estate  of  such  a 
prior  decedent.  In  order  to  establish  the  right 
of  this  deduction  it  must  be  shown — 

(1)  That  the  two  deaths  occurred  within  five 
years  of  each  other; 

(2)  That  the  first  decedent  died  after  October 
3,  1917,  the  date  of  the  passage  of  the  Revenue 
Act  of  1917,  and  that  the  second  decedent  died 
after  February  24,  1919,  the  date  of  the  passage 
of  the  Revenue  Act  of  1918; 

(3)  That  an  estate  tax  has  actually  been  col- 
lected from  the  estate  of  the  prior  decedent  (the 
mere  filing  of  a  return  for  such  an  estate  not  be- 
ing sufficient) ;  and 

(4)  That  the  property  received  from  the  prior 
estate  was  returned  as  part  of  the  gross  estate 
of  the  prior  decedent,  and  the  property  the  value 
of  which  is  sought  to  be  deducted,  or  property 
taken  in  exchange  therefor,  has  been  included  in 
the  gross  estate  of  the  second  decedent. 

The  statute  limits  the  deduction  to  the  value 
of  property  which  can  be  identified  by  the  execu- 


150  FEDERAL  ESTATE  TAX. 

Property    originally    received — Taken    in    exchange. 

tor  as  having  been  received  or  acquired  in  the 
manner  described.  The  burden  rests  upon  the 
executor  of  proving  that  the  estate  is  entitled 
to  this  deduction."     (Art.  50.) 

§  158.  Same — Where  property  originally  received  is 
part  of  the  gross  estate. 
The  Regulations  provide: 

"If  the  property  originally  received  from  the 
prior  estate  is  included  in  the  decedent's  gross 
estate,  the  executor  must  describe  it  fully,  and 
prove  its  identity  with  the  property  received 
from  the  prior  estate.  The  value  to  be  deducted 
is  the  value  at  the  time  of  the  second  decedent's 
death."     (Art.  51.) 

§  159.  Same — Where  the  gross  estate  contains  prop- 
erty taken  in  exchange  for  that  previously 
taxed. 

The  Regulations  provide: 

"The  deduction  for  substituted  property  is 
limited  to  property  acquired  in  exchange  for 
the  identical  property  received  from  the  estate 
of  the  prior  decedent.  Where  there  is  a  subse- 
quent exchange,  the  right  to  deduction  is  lost. 
Where,  however,  property  is  sold,  and  the  pro- 
ceeds immediately  invested  in  other  property, 
the  property  purchased  is  deemed  to  be  taken 
in  exchange,  and  its  value  is  deductible."  (Art. 
52.) 


DEDUCTIONS.  151 


Proof  required — Deduction  proportioned. 


§  160.  Same — Proof  required. 

The  Regulations  provide: 

"In  the  case  of  an  exchange  the  executor  must 
describe  and  identify  fully  both  the  property 
originally  received  from  the  prior  estate  and  the 
property  acquired  in  exchange  therefor.  He 
must  also  state  the  date  and  nature  of  the  trans- 
action by  which  the  exchange  was  effected,  the 
name  and  address  of  the  transferee,  and  the  con- 
sideration, if  any,  given  or  received  by  the  de- 
cedent in  addition  to  the  property  received  from 
the  prior  estate.  If  the  exchange  was  made  by 
written  instrument  of  public  record,  a  precise 
reference  must  be  made  to  the  record  contain- 
ing the  instrument,  and  if  by  instrument  not  of 
record  a  copy  of  the  instrument  must  be  sup- 
plied. If  there  was  no  written  instrument,  an 
affidavit  as  to  the  facts  of  the  exchange  by  one 
or  more  persons  having  personal  knowledge  of 
the  matter  must  be  furnished."    (Art.  52.) 

§  161.  Same — Deduction  proportioned  to  value  of 
original  property. 

The  Regulations  provide: 

"If  at  the  time  of  exchange  the  decedent  gave 
a  consideration  in  addition  to  the  property  re- 
ceived from  the  prior  estate,  and  acquired  prop- 
erty of  greater  value  than  the  property  so  re- 
ceived, there  may  be  deducted  the  proportion  of 
the  value  of  the  property  received  in  exchange 
which  the  value  of  the  original  property  bears 
thereto."    (Art.  52.) 


152  FEDERAL  ESTATE  TAX. 

Charitable  bequests — Estates  entitled  to   deduction. 

§  162.  Charitable  and  similar  bequests. 

The  statute  provides  for  the  deduction  from  the 

estate  of  a  resident: 

"The  amount  of  all  bequests,  legacies,  de- 
vises, or  gifts,  to  or  for  the  use  of  the  United 
States,  any  State,  Territory,  any  political  sub- 
division thereof,  or  the  District  of  Columbia, 
for  exclusively  public  purposes,  or  to  or  for  the 
use  of  any  corporation  organized  and  operated 
exclusively  for  religious,  charitable,  scientific, 
literary,  or  educational  purposes,  including  the 
encouragement  of  art  and  the  prevention  of 
cruelty  to  children  or  animals,  no  part  of  the  net 
earnings  of  which  inures  to  the  benefit  of  any 
private  stockholder  or  individual,  or  to  a  trus- 
tee or  trustees  exclusively  for  such  religious, 
charitable,  scientific,  literary,  or  educational 
purposes."     (Sec.  403  [a]  [3]). 

§  163.  Same — What  estates  entitled  to  the  deduc- 
tion. 

The  statute  provides  that: 

"This  deduction  shall  be  made  in  the  case  of 
the  estates  of  all  decedents  who  have  died  since 
December  31,  1917."    (Sec.  403  [a]   [3]). 

The  Regulations  provide: 

"The  deduction  may  be  claimed  by  the  estates 
of  all  decedents  dying  after  December  31,  1917. 
Where  the  tax  has  been  paid  without  taking  the 
deduction  a  claim  for  refund  may  be  made,  as 
provided  by  Article  110."     (Art.  57.) 


DEDUCTIONS.  153 


Bequests — Gifts  in  decedent's  life  time. 

§  164.  Same — Bequests  for  religious,  charitable, 
scientific,  literary  or  educational  purposes 
— General  rules  for  deduction — Remainder 
interests. 

The  Regulations  provide: 

" Bequests  to  religious,  charitable,  scientific, 
literary,  or  educational  corporations  are  deduct- 
ible only  if  the  corporation  is  organized  or  oper- 
ated exclusively  for  one  of  the  purposes  speci- 
fied (see  Art.  54).  Similarly  in  the  case  of  a 
trust,  the  trust  must  be  exclusively  for  such  pur- 
poses. It  does  not  prevent  deduction,  however, 
that  the  property  placed  in  trust  is  also  subject 
to  another  trust  for  a  private  purpose.  Thus, 
where  money  or  property  is  placed  in  trust  to 
pay  the  income  to  an  individual  during  life,  and 
then  to  pay  or  deliver  the  same  to  a  charitable 
corporation,  or  apply  the  principal  to  a  charit- 
able purpose,  the  charitable  bequest  or  devise 
forms  the  basis  for  a  deduction.  The  amount  of 
the  deduction,  in  such  case,  is  the  value,  at  the 
date  of  the  decedent's  death,  of  the  remainder 
interest  in  the  money  or  property  which  is  de- 
vised or  bequeathed  to  charity."       (Art.  53.) 

§  165.  Same — Gifts  in  decedent's  life  time. 
The  Regulations  provide: 

"Gifts  made  in  the  decedent's  lifetime  are 
deductible  only  if  made  in  contemplation  of 
death,  or  intended   to  take   effect  at  or  after 


154  FEDERAL  ESTATE  TAX. 

Foreign    bequest — Exempt    character — Charitable    corporations. 

death,  and  the  property  is  consequently  included 
in  the  gross  estate.  Gifts  made  in  satisfaction 
of  a  legacy  are  also  deductible."    (Art.  53.) 

§  166.  Same — Foreign  bequest. 
The  Regulations  provide: 

"The  deduction  is  not  limited  in  the  case  of 
the  estates  of  residents  to  bequests  to  domestic 
corporations  or  to  trustees  for  use  within  the 
United  States."    (Art.  53.) 

§  167.  Same — Tests  of  exempt  character  of  bequest. 

The  Regulations  provide: 

"In  order  to  be  exempt  the  corporation  or  as- 
sociation must  meet  three  tests:  (1)  it  must  be 
organized  and  operated  for  one  or  more  of  the 
specified  purposes;  (2)  it  must  be  organized  and 
operated  exclusively  for  such  purposes;  and  (3) 
no  part  of  its  income  must  inure  to  the  benefit 
of  private  stockholders  or  individuals."  (Art. 
54.) 

§  168.  Same — Charitable  corporations. 

The  Regulations  provide: 

"Charitable  corporations  include  an  associa- 
tion for  the  relief  of  the  families  of  clergymen, 
even  though  the  latter  make  a  contribution  to 
the  fund  established  for  this  purpose;  or  for 
furnishing  the  services  of  trained  nurses  to  per- 
sons unable  to  pay  for  them;  or  for  aiding  the 
general  body  of  litigants  by  improving  the  effi- 


DEDUCTIONS.  153 


Religious  corporations  conducting  business  enterprise. 

cient  administration  of  justice.  Educational 
corporations  include  an  association  whose  sole 
purpose  is  the  instruction  of  the  public,  even  if 
it  merely  disseminates  propaganda  on  a  single 
question.  Thus  an  association  inculcating  pro- 
hibition or  protectionist  principles  is  exempt. 
The  same  is  true  of  an  association  to  promote 
acquaintance  with  the  Spanish  language  and 
literature,  although  it  has  incidental  amusement 
features;  of  an  association  to  increase  knowledge 
of  the  civilization  of  another  country;  and  of  a 
Chautauqua  association  whose  primary  purpose 
is  to  give  lectures  on  subjects  useful  to  the  indi- 
vidual and  beneficial  to  the  community,  and 
whose  amusement  features  are  incidental  to  this 
purpose.  Societies  designed  to  encourage  the 
performance  of  first-class  orchestral  music  are 
not  exempt,  the  purpose  being  merely  to  pro- 
vide a  high  grade  of  entertainment.  Scientific 
corporations  include  an  association  for  the  sci- 
entific study  of  law,  to  the  end  of  improvement 
in  its  administration."     (Art.  54,  par.  [1]). 

§  169.  Religious  corporations  conducting  business 
enterprise. 
The  Regulations  provide: 

"Where  a  religious  corporation  owns  a  large 
quantity  of  farm  land  and  works  it,  and  also 
manufactures  and  sells  clothing  and  other  ar- 
ticles for  profit,  it  is  not  operated  exclusively 
for  religious  purposes  and  is  not  exempt,  even 


156  FEDERAL  ESTATE  TAX. 

Who    are   private    stockholders — Proof    of    exemption. 

though  its  property  is  held  in  common  and  its 
profits  do  not  inure  to  the  benefit  of  individual 
members  of  the  society."    (Art.  54,  par.  [2]). 

§  170.  Who  are  private  stockholders  or  individuals. 
The  Regulations  provide: 

"It  does  not  prevent  exemption  that  private 
individuals,  for  whose  benefit  a  charity  is  organ- 
ized, receive  the  income  of  the  corporation  or 
association.  The  statute  refers  to  individuals 
having  a  personal  and  private  interest  in  the  ac- 
tivities of  the  corporation,  such  as  stockholders. 
If,  however,  a  corporation  issues  'voting 
shares,'  which  entitle  the  holders  upon  the  dis- 
solution of  the  corporation  to  receive  the  pro- 
ceeds of  its  property,  including  accumulated  in- 
come, the  right  to  exemption  does  not  exist,  even 
though  the  by-laws  provide  that  the  sharehold- 
ers shall  not  receive  any  dividend  or  other  re- 
turn upon  their  shares."    (Art.  54,  par.  [3] ). 

§  171.  Proof  of  exemption. 

The  Regulations  provide: 

"In  order  to  prove  his  right  to  this  deduction 
the  executor  must  submit: 

(1)  Certified  copy  of  the  will  of  the  decedent, 
or  the  instrument  of  gift  in  the  case  of  a  trans- 
fer of  property  in  contemplation  of  death. 

(2)  A  receipt,  statement,  or  other  documen- 
tary evidence  to  show  the  beneficiary^s  receipt 


DEDUCTIONS.  157 


Conditional  bequests. 


of,  or  intention  to  accept,  the  legacy,  devise,  or 
gift. 

(3)  Affidavit  of  the  executor  stating  whether 
any  action  has  been  instituted  to  contest  the 
will,  or  whether,  according  to  his  information 
and  belief,  any  such  action  is  contemplated. 

(4)  Such  other  document  or  evidence  as  may 
be  specified  by  the  Bureau."     (Art.  55.) 

§  172.  Conditional  bequests. 
The  Regulations  provide: 

"  Where  the  bequest,  legacy,  devise,  or  gift  is 
dependent  upon  the  performance  of  some  act, 
or  the  happening  of  some  event,  in  order  to  be- 
come effective  it  is  necessary  that  the  perform- 
ance of  the  act  or  the  occurrence  of  the  event 
shall  have  taken  place  before  the  deduction  can 
be  allowed.    Where,  by  the  terms  of  the  bequest, 
devise  or  gift,  it  is  subject  to  be  defeated  by  a 
subsequent  act  or  event,  no  deduction  will  be 
allowed."    (Art.  56.) 
The  ruling  as  to  gifts  upon  condition  precedent 
seems  readily  sustainable,  since  sucli   gifts  do  not 
actually  become  effective  until  the  performance  of 
the  condition. 

The  ruling  as  to  gifts  upon  condition  subsequent 
is  more  vulnerable.  Such  gifts  become  operative  at 
once,  being  merely  subject  to  be  defeated  upon  the 
happening  of  the  subsequent  condition.  For  this 
reason  it  is  by  no  means  clear  that  such  cases  do  not 


158  FEDERAL  ESTATE  TAX. 

Specific  alleged  charitable  bequests. 

come  within  the  provisions  of  the  statute.  The  rul- 
ing, however,  has  apparently  not  yet  been  chal- 
lenged. 

§  173.  Same — Specific  alleged  charitable  bequests. 

A  bequest  to  the  Youngstown  Foundation  is  held 
to  be  deductible.40  A  trust  to  apply  the  income  to 
such  poor  and  deserving  persons  in  or  near  a  speci- 
fied town  as  the  trustees  may  select  is  held  to  con- 
stitute a  deductible  bequest,  the  relief  of  the  poor 
being  a  charitable  purpose,  and  the  charitable  na- 
ture of  the  gift  not  being  affected  by  its  localization 
or  the  discretionary  powers  of  the  trustees.  A  trust, 
however,  to  apply  the  income  to  the  "beneficial 
usage"  of  the  citizens  of  a  town,  "without  any  re- 
gard to  what  may  be  deemed  legal  or  public  chari- 
ties under  the  laws  of  the  State"  is  held  not  to  con- 
stitute a  deductible  gift,  the  word  "beneficial"  be- 
ing equivalent  to  "benevolent,"  a  term  embracing 
non-charitable  purposes.41 

40.  This  is  a  trust  instituted  and  executed  by  a  trust  com- 
pany in  the  City  of  Youngstown,  Ohio,  for  charitable  and 
educational  purposes. 

41.  A  point  frequently  passed  upon  by  the  courts.  See  Adye 
v.  Smith,  44  Conn.  60;  Murdock  v.  Bridges,  91  Me.  124,  39  Atl. 
Rep.  475;  Chamberlain  v.  Stearns,  111  Mass.  267;  German 
Corporation  of  Negaunee  v.  Negaunee  German  Aid  Society, 
172  Mich.  650,  138  N.  W.  R«p.  343;  Hegeman's  Executors  v. 
Roome,  70  N.  J.  Eq.  562,  62  Atl.  Rep.  392;  Van  Syckel  v. 
Johnson,  80  N.  J.  Eq.  117,  70  Atl.  Rep.  657;  People  v.  Powers, 
147  N.  Y.  104,  41  N.  E.  Rep.  432;  In  re  Altman's  Estate,  87 
Misc.  255,  149  N.  Y.  Supp.  601. 


DEDUCTIONS.  159 


Amount  of  deduction. 


Similarly,  a  bequest  to  trustees  for  the  erection  of 
an  auditorium,  to.be  used  for  the  enjoyment,  enter- 
tainment and  education  of  persons  residing  in  a  city 
and  its  vicinity,  is  held  not  to  be  deductible,  not  be- 
ing for  charitable  or  other  specified  purposes. 

A  bequest  to  trustees  of  a  church  or  of  a  cemetery 
of  a  fund,  with  directions  to  apply  the  income  to  the 
upkeep  of  a  private  cemetery  lot,  is  not  for  a  religi- 
ous or  charitable  purpose,  and  is  not  deductible. 
The  same  is  true  of  a  trust  created  for  the  care  of  an 
animal  owned  by  the  decedent. 

§  174.  Same — Amount  of  deduction. 

As  already  seen,  where  the  exempt  bequest  is  of 
a  remainder  interest  the  amount  of  the  deduction  is 
the  value  of  this  interest  at  the  time  of  the  deced- 
ent's death.  It  is  held  not  to  be  necessary  that  the 
gift  be  of  an  outright,  present  interest.  It  is,  how- 
ever, held  to  be  essential  to  deduction  that  the  value 
of  the  exempt  gift  at  the  time  of  the  decedent 's  death 
shall  be  determinable  with  reasonable  certainty. 
Thus,  where  the  exempt  gift  is  preceded  by  a  com- 
plicated series  of  trusts  for  private  individuals,  with 
reference  to  one  of  which  the  trustee  has  absolute 
discretion  to  apply  the  principal  of  the  fund  to  the 
use  of  the  beneficiary,  thus  diverting  the  property 
from  the  exempt  purpose,  no  deduction  will  be  al- 
lowed.42    Where,  however,  the  gift  takes  effect  at 

42.  But  it  is  ruled  in  this  connection  that  a  claim  for  refund 
may  be  made  later  when  the  amount  of  the  charitable  gift   is 
determinable. 
11 


160  FEDERAL  ESTATE  TAX. 

Amount  of  deduction. 

the  death  of  the  decedent,  the  application  of  the  in- 
come in  perpetuity  to  a  charitable  purpose  amounts 
to  a  charitable  gift  of  the  principal  of  the  trust  fund, 
and  the  entire  amount  thereof  is  deductible. 

The  amount  of  the  deduction  is  that  actually  re- 
ceived by  the  legatee  having  the  specified  exempt 
character.  Thus,  where  the  legacy  is  subject  to  an 
inheritance  tax,  so  that  the  legatee  obtains  only  what 
remains  after  deduction  of  the  tax,  this  remaining 
sum  represents  the  amount  of  the  deduction.  The 
same  rule  is  applied  where  the  decedent  bequeaths 
his  residuary  estate  to  one  of  the  specified  exempt 
institutions.  As  the  federal  tax  must  be  deducted 
before  payment  of  the  legacy,  the  deductible  bequest 
is  only  what  remains  after  payment  of  the  tax.43 

43.  There  is  a  difficulty  in  such  a  case,  due  to  the  fact  that 
the  amount  of  the  tax  and  of  the  deductible  bequest  are  both 
unknown,  and  that  each  amount  is  dependent  upon  the  other. 
An  algebraical  formula  can,  however,  be  obtained  in  any  such 
case  for  determining  each  of  these  factors.  This  formula  has 
been  determined  in  the  case  of  a  taxable  estate  between 
$250,000  and  $450,000,  where  the  decedent  dies  between  Octo- 
ber 4,  1917,  and  February  24,  1919.  X  (unknown)  representing 
the  amount  of  the  tax,  and  T  (known)  the  amount  of  all  tax- 
able bequests,  the   formula  is   as  follows : 

.08  T  — $13000 

X  = 

.92 
The  amount  of  the  tax  being  thus  found,  the  amount  of  the 
deductible  residuary  bequest  is  readily  ascertained. 


DEDUCTIONS.  161 


Specific   exemption— Nonresident    estates. 


§  175.  Specific  exemption. 

The  statute  provides,  finally,  for  the  deduction  of 

"An  exemption  of  $50,000."     (Sec.  403  [a]    [4]). 

The  Regulations  provide: 

"There  may  be  deducted  from  the  gross  es- 
tate of  all  resident  decedents  a  specific  exemp- 
tion of  $50,000.  No  part  of  this  exemption  is 
allowed  in  the  case  of  nonresident  decedents. 
(See  Art.  59.)  If  more  than  one  return  is  made 
for  purposes  of  the  tax,  the  exemption  may  be 
taken  only  once."     (Art.  58.) 

NONRESIDENT  ESTATES 

§  176.  In  general. 

The  statute  provides  that  the  net  estate  shall  be 

determined: 

"(b)  In  the  case  of  a  nonresident,  by  deduct- 
ing from  the  value  of  that  part  of  his  gross  es- 
tate which  at  the  time  of  his  death  is  situated 
in  the  United  States — 

"  (1)  That  proportion  of  the  deductions  speci- 
fied in  paragraph  (1)  of  subdivision  (a)  of  this 
section  which  the  value  of  such  part  bears  to 
the  value  of  his  entire  gross  estate,  wherever 
situated,  but  in  no  case  shall  the  amount  so  de- 
ducted exceed  10  per  centum  of  the  value  of  that 
part  of  his  gross  estate  which  at  the  time  of  his 
death  is  situated  in  the  United  States."  (Sec. 
403  [h]  [1]). 


162  FEDERAL  ESTATE  TAX. 

Manner  of  making  deduction — Claims,  expenses,  etc. 

§  177.  Manner  of  making  deduction. 

The  Regulations  provide: 

' '  The  gross  estate  of  a  resident  and  of  a  non- 
resident are  made  up  in  the  same  way.  In  ascer- 
taining the  net  estate,  however,  which  is  subject 
to  tax,  there  is  a  radical  difference  between  the 
two  cases.  Whereas  the  net  estate  in  the  case 
of  a  resident  is  determined  by  making  the  speci- 
fied deductions  from  the  entire  gross  estate,  the 
net  estate  in  the  case  of  a  nonresident  is  deter- 
mined by  making  the  deductions  from  the  value 
of  so  much  of  the  gross  estate  as  is  situated  in 
the  United  States.  Thus,  in  substance,  the  stat- 
ute attempts  to  tax  only  the  transfer  of  so  much 
of  the  estate  of  a  nonresident  as  is  situated  in 
the  United  States.  On  the  other  hand,  nonresi- 
dent estates  are  not  entitled  to  the  specific  ex- 
emption of  $50,000."     (Art.  59.) 

§  178.  Claims,  administration  expenses,  etc. 

These  are  the  deduction  items  specified  in  para- 
graph (1)  of  subdivision  (a)  of  Section  403.  They 
may  be  deducted  only  to  the  extent  specified  in  the 
provisions  of  the  statute  concerning  nonresident  es- 
tates.   The  Regulations  provide: 

"The  character  of  the  deduction  is  the  same 
as  in  the  case  of  resident  estates.  (See  Arts.  37 
to  49.)  It  is  immaterial  whether  the  expendi- 
tures are  incurred  or  paid  in  this  country  or  else- 
where. The  deduction,  however,  is  subject  to 
limitations  which  do  not  apply  in  the  case  of  a 


DEDUCTIONS.  163 


Property  previously  taxed. 


resident  estate.  Only  that  proportion  of  the 
claims  and .  expenses  is  deductible  which  the 
value  of  the  property  situated  in  the  United 
States  bears  to  the  value  of  the  entire  gross  es- 
tate, wherever  situated;  and  in  no  event  may  a 
sum  be  deducted  in  excess  of  10  per  cent  of  the 
value  of  the  property  situated  in  the  United 
States."    (Art.  61.) 

§  179.  Property  previously  taxed. 

The  statute  provides  for  the  deduction  from  the 
gross  estate  of  a  nonresident  of: 

"An  amount  equal  to  the  value  at  the  time  of 
the  decedent's  death  of  any  property,  real,  per- 
sonal, or  mixed,  which  can  be  identified  as  Hav- 
ing been  received  by  the  decedent  as  a  share  in 
the  estate  of  any  person  who  died  within  five 
years  prior  to  the  death  of  the  decedent,  or 
which  can  be  identified  as  having  been  acquired 
by  the  decedent  in  exchange  for  property  so  re- 
ceived, if  an  estate  tax  under  the  Revenue  Act 
of  1917  or  under  this  Act  wras  collected  from 
such  estate,  and  if  such  property  is  included  in 
that  part  of  the  decedent's  gross  estate  which 
at  the  time  of  his  death  is  situated  in  the  United 
States."    (Sec.  403  [b]  [2]). 
It  will  be  observed  that  the  limitation  of  the  de- 
duction to  10  per  cent  of  the  value  of  the  gross  estate 
situated  in  the  United  States,  applied  to  the  items 
specified  in  paragraph  (1)  of  subdivision  (a),  is  not 
imposed  with  reference  to  property  previously  taxed. 


164  FEDERAL  ESTATE  TAX. 

Property  previously  taxed. 

The  Regulations  provide: 

"The  value  of  property  owned  by  a  nonresi- 
dent person  dying  after  October  3,  1917,  or  form- 
ing part  of  the  gross  estate  of  the  decedent,  may 
be  deducted  within  the  limitations  prescribed 
with  reference  to  resident  estates  (see  Art.  50), 
and  subject  to  the  further  condition  that  the 
property  shall  have  been  situated  in  the  United 
States  at  the  time  of  the  death  of  the  second  de- 
cedent. The  detailed  rules  for  deductions  in  the 
case  of  nonresident  estates  are  consequently  as 
follows: 

(1)  That  the  two  deaths  occurred  within  five 
years  of  each  other. 

(2)  That  the  first  decedent  died  after  October 
3,  1917,  and  that  the  second  decedent  died  after 
February  24,  1919. 

(3)  That  an  estate  tax  has  actually  been  col- 
lected from  the  estate  of  the  first  decedent  (the 
mere  filing  of  a  return  not  being  sufficient). 

(4)  That  the  property  originally  received 
from  the  prior  estate  has  been  returned  as  part 
of  the  gross  estate  of  the  prior  decedent,  and 
that  the  property  sought  to  be  deducted  is  either 
the  identical  property  so  returned  or  was  taken 
in  exchange  for  such  property;  and 

(5)  That  the  property  sought  to  be  deducted 
shall  have  been  situated  in  the  United  States  at 
the  time  of  the  death  of  the  present  decedent." 
(Art.  62.) 


DEDUCTIONS.  165 


Public,  charitable  and  similar  gifts — Deduction   limited. 

The  same  rules  for  determining  when  property  is 
acquired  in  exchange  apply  to  the  case  of  the  estate 
of  a  nonresident  as  to  the  estate  of  a  resident.44 

§  180.  Public,  charitable  and  similar  gifts. 

The  statute  provides  for  the  deduction  from  the 

estate  of  a  nonresident  of: 

"The  amount  of  all  bequests,  legacies,  de- 
vises, or  gifts,  to  or  for  the  use  of  the  United 
States,  any  State,  Territory,  any  political  sub- 
division thereof,  or  the  District  of  Columbia, 
for  exclusively  public  purposes,  or  to  or  for  the 
use  of  any  domestic  corporation  organized  and 
operated  exclusively  for  religious,  charitable, 
scientific,  literary,  or  educational  purposes,  in- 
cluding the  encouragement  of  art  and  the  pre- 
vention of  cruelty  to  children  or  animals,  no 
part  of  the  net  earnings  of  which  inures  to  the 
benefit  of  any  private  stockholder  or  individual, 
or  to  a  trustee  or  trustees  exclusively  for  such 
religious,  charitable,  scientific,  literary,  or  edu- 
cational purposes  within  the  United  States." 
(Sec.  403  [b]  [3]). 
As  in  the  case  of  property  previously  taxed,  the 

deduction  is  not  limited  to  10  per  cent  of  the  value 

of  the  gross  estate  situated  in  the  United  States. 

§  181.  Deduction  limited  to  domestic  gifts. 

It  will  be  observed  that  the  statute  limits  the  de- 
duction to  gifts  to  a  "domestic  corporation"  or  to 

44.  See  Regulations,  Art.  62. 


166  FEDERAL  ESTATE  TAX. 

Estates  entitled  to  the  deduction. 

trusts  for  the  specified  purposes  "within  the  United 
States."  A  distinction  is  here  drawn  between  the 
estates  of  residents  and  nonresidents.  Gifts  of  this 
character,  when  made  by  a  resident,  are  deductible 
without  reference  to  whether  the  donee  is  a  domestic 
or  a  foreign  corporation,  or  where  the  trust  is  to  be 
executed. 

The  Regulations  provide: 

''Where  the  bequest  is  to  a  corporation,  it  is 
limited  to  a  domestic  corporation;  that  is,  one 
created  or  organized  in  the  United  States. 
Where  the  bequest  is  to  a  trustee,  it  must  be  for 
use  exclusively  within  the  United  States.  The 
requirements  are  different  and  should  not  be 
confused.  The  first  relates  to  the  character  of 
the  donee ;  the  second  to  the  character  of  the  use 
of  the  gift.  With  these  exceptions  the  rules  for 
deduction  are  the  same  as  in  the  case  of  resident 
estates  (see  Arts.  53,  54)."    (Art.  63.) 

§  182.  Estates  entitled  to  the  deduction. 
The  statute  provides  that — 

"This  deduction  shall  be  made  in  case  of  the 
estates  of  all  decedents  who  have  died  since  De- 
cember 31,  1917."     (Sec.  403  [b]   [3]). 
This  provision  is  the  same  as  in  the  case  of  the  es- 
tates of  residents. 


DEDUCTIONS.  167 


Information  as  to  foreign  property — Claims  for  refund. 

§  183.  Information  as  to  foreign  property. 
The  statute  provides: 

"No  deduction  shall  be  allowed  in  the  case  of 
a  nonresident  unless  the  executor  includes  in  the 
return  required  to  be  filed  under  section  404  the 
value  at  the  time  of  his  death  of  that  part  of  the 
gross  estate  of  the  nonresident  not  situated  in 
the  United  States."     (Sec.  403.)45 

§  184.  Claims  for  refund. 
The  statute  provides: 

' '  In  the  case  of  any  estate  in  respect  to  which 
the  tax  under  existing  law  has  been  paid,  if 
necessary  to  allow  the  benefit  of  the  deduction 
under  paragraph  (3)  of  subdivision  (a)  or  (b) 
the  tax  shall  be  redetermined  and  any  excess  of 
tax  paid  shall  be  refunded  to  the  executor." 
(Sec.  403.) 

45.  See  in  this  connection  the  rule  (infra,  pp.  193-5)  requir- 
ing information  from  nonresident  estates,  whether  or  not  the 
executor  seeks  deductions. 


CHAPTER  V. 

SIXTY-DAY  NOTICE. 
RESIDENT    ESTATES. 

§  185.  The  statute. 
The  statute  provides: 

"That  the  executor,  within  sixty  days  after 
qualifying  as  such,  or  after  coming  into  posses- 
sion of  any  property  of  the  decedent,  whichever 
event  first  occurs,  shall  give  written  notice  there- 
of to  the  collector. ' '    ( Sec.  404. ) a 
It  will  be  observed  that  the  statutory  requirement 
is  general.    It  is  not,  as  in  the  case  of  the  return, 
conditioned  upon  the   size   of   the   estate.2     There 
would,  however,  be  no  reason  for  requiring  the  notice 
in  the  case  of  estates  obviously  too  small  to  be  sub- 
ject to  tax.    The  Regulations  recognize  this,  and  re- 
quire the  notice  only  in  the  case  of  taxable  estates. 
They  provide: 

"A  preliminary  notice,  called  the  60-day  no- 
tice, is  required  to  be  filed  in  the  case  of  every 
resident  decedent  who  died  on  or  after  February 
25,  1919,  the  gross  amount  of  whose  estate  ex- 
ceeds $50,000.  This  notice  must  be  filed  in 
duplicate  with  the  collector  in  whose  district 
the  decedent  had  his  domicile  at  the  time  of  his 

1.  Under  the  Revenue  Act  of  1916  (See.  205)  the  notice  was 
required  within  thirty  days  of  qualification  or  receipt  of  prop- 
erty. 

2.  See  pp.  182,  183. 

[168] 


SIXTY-DAY  NOTICE.  169 

Prior  rule — Notice   by   executor. 

death.  Where  there  is  doubt  as  to  whether  the 
gross  estate  exceeds  $50,000,  the  notice  should 
be  filed,  as  matter  of  precaution,  in  order  to 
avoid  penalties."  (Art.  66.) 
These  provisions  conform  the  requirements  as  to 
notice  with  those  with  reference  to  the  return.3 

§  186.  Notice  under  Revenue  Act  of  1916. 
The  Regulations  provide: 

''Prior  to  February  25,  1919,  the  notice  was 
required  if  the  gross  estate  exceeded  $60,000, 
or  if  there  was  any  net  estate  after  the  deduc- 
tions allowed  by  law,  including  the  $50,000  ex- 
emption, had  been  taken.    These  provisions  are 
not  now  in  effect  except  to  determine  delin- 
quency under  previous  acts."     (Art.  66.) 
That  is,  the  requirements  as  to  notice  under  the 
previous  Act  conformed  to  the  somewhat  different 
requirements  then  existing  with  reference  to  the  re- 
turn.4 

§  187.  Notice  by  executor  or  administrator. 

The  Regulations  provide: 

"The  executor  or  administrator  of  an  estate 
is  required  to  file  notice  on  Form  704  within  60 
days  of  his  appointment  by  the  court,  or  of  com- 
ing into  possession  of  any  property  of  the  estate, 
whichever  event  occurs  first.   The  primary  pur- 

3.  See  pp.  182,  183. 

4.  See  Revenue  Act  of  1916,  Sec.  205. 


170  FEDERAL  ESTATE  TAX. 

Notice  by  other  than  executor  or  administrator. 

pose  of  the  notice  is  to  advise  the  Government 
of  the  existence  of  taxable  estates,  and  filing 
should  not  be  delayed  beyond  the  60-day  period 
because  of  uncertainty  as  to  the  exact  value 
of  the  assets.  Since  the  filing  of  the  notice  with- 
in the  prescribed  period  is  mandatory,  the  esti- 
mate of  the  gross  estate  called  for  by  the  notice 
is  merely  the  best  approximation  of  value  which 
can  be  made  within  the  time  allowed.  The  in- 
structions upon  the  back  of  the  form  should  be 
read  carefully  before  executing  the  notice.  The 
signature  of  one  executor  or  administrator  upon 
Form  704  is  sufficient."     (Art.  67.) 

§  188.  Notice  by  other  than  executor  or  adminis- 
trator. 
The  statute  provides: 

"The  term  'executor'  means  the  executor  or 

administrator  of  the  decedent,  or,  if  there  is  no 

executor  or  administrator,  any  person  who  takes 

possession  of  any  property  of  the  decedent." 

(Sec.  400.) 

The  obvious  purpose  of  this  provision  is  to  secure 

information    with    reference    to    taxable    estates, 

whether  or  not  they  are  administered  in  the  ordinary 

way.    A  liberal  construction  is  given  to  the  language, 

in  accordance  with  this  policy.     The  Regulations 

provide : 

"The  notice  upon  Form  704  must  be  filed  by 
others  than  the  executor  or  administrator  if 
either  of  the  following  situations  exists: 


SIXTY-DAY  NOTICE.  171 

Where  no  executor  appointed. 

(1)  No  executor  or  administrator  has  been 
appointed. 

J2)  There  is  property  included  in  the  gross 
estate,  as  defined  by  statute,  which  has  not,  and 
will  not,  come  into  the  custody  and  control  of 
the  executor. 

In  these  cases,  the  persons  in  possession  of  the 
property  included  in  the  gross  estate  are  execu- 
tors, within  the  meaning  of  the  statute,  for  the 
purpose  of  filing  the  notice."     (Art.  68. )5 

§  189.  Where  no  executor  appointed. 
The  Regulations  provide: 

"Where  no  executor  or  administrator  has 
been  appointed,  the  person  taking  possession  of 
property  at  the  time  of  death  is  required  to  file 
notice  within  60  days  of  the  date  of  death.  The 
notice  must  be  filed  whether  possession  of  the 
property  was  held  at  the  date  of  death,  or  was 
acquired  thereafter.  The  notice  on  Form  704 
must  be  filed  by  such  persons  in  any  case  where 
an  executor  or  administrator  has  not  been  ap- 
pointed within  60  days  of  the  decedent's  death, 
although  one  is  appointed  subsequently.  Where 
an  executor  or  administrator  is  appointed  with- 

5.  It  may  perhaps  be  a  question  whether  the  substitionary 
provision  of  the  statute  applies  to  a  ease  in  which  an  executor 
or  administrator  has  been  appointed.  The  Regulations  con- 
strue the  language  liberally,  so  as  to  make  the  words  "ex- 
ecutor" or  "administrator"  apply  only  to  a  person  holding  and 
administering  the  particular  property  in  question. 


172  FEDERAL  ESTATE  TAX. 

When  property  not  within  executor's  control. 

in  the  60-day  period,  the  duty  of  filing  the  notice 
devolves  upon  him;  and  all  other  persons  are 
relieved  from  liability  to  file  with  respect  to 
property  coming  into  the  custody  and  control 
of  the  executor  or  administrator."     (Art.  69.) 

§  190.  When  property  not  within  executor's  control. 
The  Regulations  provide: 

"Where  there  is  property  that  will  not  come 
into  the  custody  and  control  of  the  executor,  but 
which  is  included  in  the  gross  estate  as  defined 
by  the  statute,  the  notice  on  Form  704  must  be 
filed  within  60  days  of  the  date  of  death  by  the 
person  in  possession  or  control  of  the  property 
at  the  time  of  death. 

The  persons  required  to  file  Form  704,  in  com- 
pliance with  this  requirement,  includes  the  fol- 
lowing : 

(1)  The  surviving  husband  or  wife  in  the 
case  of  property  owned  as  tenants  in  the  en- 
tirety. 

(2)  Donees  who  have  received  within  two 
years  prior  to  the  decedent's  death  any  gift  of 
material  value  from  the  decedent,  or  who  have 
received  at  any  time  whatever  gifts  made  by  the 
decedent  in  contemplation  of  death  or  intended 
to  take  effect  at  or  after  death. 

(3)  Trustees  holding  property  conveyed  dur- 
ing lifetime  by  decedent  in  contemplation  of 
death,  or  with  intent  to  provide  for  others  at  or 
after  the  decedent 's  death,  regardless  of  the  date 


SIXTY-DAY  NOTICE.  173 

Notice    by    succeeding   beneficiary. 

of  execution  of  the  instrument  making  the  con- 
veyance. 

(4)  Fiduciaries  holding  property  of  any  kind 
jointly  for  the  decedent  and  another  or  others. 
Example:  A  savings  bank  holding  a  joint  ac- 
count in  the  name  of  the  decedent  and  another, 
payable  to  either  or  to  the  survivor,  must  file 
Form  704  for  the  full  amount  of  the  account. 

(5)  Trustees  having  in  charge  property  over 
which  the  decedent  exercised  a  general  power 
of  appointment,  and  which  will  not  come  into 
the  possession  and  control  of  the  executor  or  ad- 
ministrator. 

(6)  Beneficiaries  other  than  the  executor  who 
receive  insurance  upon  the  decedent's  life,  pro- 
vided the  total  amount  of  the  insurance  receiv- 
able by  all  such  beneficiaries  exceeds  $40,000." 
(Art.  70.) 

In  analogy  to  these  cases  specified  in  the  Regula- 
tions, it  is  ruled  that  where  money  standing  in  the 
joint  names  of  two  persons  is  payable  to  the  sur- 
vivor, who  receives  it,  such  survivor  is  liable  to  give 
the  60-day  notice  with  respect  to  the  money  so 
received. 

§  191.  Same — Notice  by  succeeding  beneficiary. 
The  Regulations  provide: 

"The  primary  duty  of  filing  notice  with  re- 
spect to  property  which  will  not  come  into  the 
executor's  control  rests  upon  the  person  actually 
in  possession  at  the  time  of  death.     It  is  the 


174  FEDERAL  ESTATE  TAX. 

Notice   by  insurance   companies. 

duty  of  the  succeeding  owner,  however,  where 
property  of  this  character  is  held  at  the  time  of 
death  by  an  agent  or  fiduciary,  to  give  notice 
within  60  days  of  the  date  of  taking  possession, 
unless  he  finds  that  notice  has  already  been  filed. 
For  example,  the  appointee  of  property,  under 
a  general  power  of  appointment  exercised  by 
the  decedent,  should  file  notice  within  60  days 
of  receiving  possession,  unless  the  notice  has 
already  been  filed. "    ( Art.  70. ) 
The  illustration  here  given  is  not  exclusive.    The 
ruling  would  doubtless  apply  to  the  case,  for  in- 
stance, of  a  person  receiving  the  proceeds  of  a  joint 
bank  account  upon  the  death  of  the  decedent.6 

§  192.  Notice  by  insurance  companies. 
The  Regulations  provide: 

"Sixty-day  notice  upon  Form  787  must  be 
filed  by  every  insurance  company  which  pays 
insurance  upon  the  life  of  a  resident  decedent  to 
beneficiaries  other  than  the  executor  or  admin- 
istrator in  amounts  aggregating  more  than 
$40,000,  or  which  has  knowledge  of  insurance 
payable  to  such  beneficiaries  by  other  insurance 
companies,  aggregating,  with  amounts  payable 
by  the  company  itself,  more  than  $40,000.  *  *  * 
Notice  should  be  filed  with  the  collector  of  the 
district  in  which  the  decedent  had  his  domicile 
within  60  days  of  receipt  by  the  company  of  no- 
tification of  death.     If  the  insurance  company 

6.  See  pp.  173,  184-5. 


SIXTY-DAY  NOTICE.  175 

Annuity  policies. 

is  in  doubt  as  to  its  liability  to  give  notice,  the 
notice  should  be  filed."     (Art.  71.) 

This  ruling  involves  the  proposition  that  the  com- 
pany "takes  possession"  of  property  of  the  deced- 
ent, and  is  consequently  an  executor  within  the 
meaning  of  the  statute.  In  this  respect  the  company 
appears  to  be  in  substantially  the  same  position  as 
one  in  possession  of  property  during  the  life  of  the 
decedent,  and  continuing  such  possession  after  his 
death.7 

There  is  the  further  question  whether  the  posses- 
sion so  taken  is  "of  any  property  of  the  decedent." 
Technically,  that  might  be  doubtful.  The  purpose 
of  the  statute,  however,  is  evidently  to  secure  com- 
plete notice  of  all  property  constituting  part  of  the 
gross  estate;  and  a  broad  construction  of  the  word 
"property  of  the  decedent"  is  in  furtherance  of  the 
statutory  intent. 

§  193.  Annuity  policies. 
The  Regulations  provide: 

"If  the  proceeds  of  any  policy  are  payable  in 
the  form  of  an  annuity,  the  present  worth  of 
such  annuity,  for  the  purpose  of  deducting  the 
$40,000  exemption,  should  be  computed  in  ac- 
cordance with  the  provision  of  Article  20." 
(Art.  71. )8 

7.  As  to  which  see  Treasury  Decision  2421;  Dec.  22,  191b\ 
The  Bureau  has  always  taken  the  position  that  such  a  ease 
comes  within  the  statutory  definition. 

8.  Relating1  to  the  "Valuation  of  annuities,  life,  and  re- 
mainder interests." 

12 


176  FEDERAL  ESTATE  TAX. 

Insurance — Military    exemption — Local    executor. 

§  194.  Insurance  taken  out  with  foreign  branch. 

The  Regulations  provide: 

1 '  Where  insurance  is  taken  out  with  a  foreign 
branch  of  a  domestic  insurance  company,  the 
notice  should  be  given  by  the  home  office  of  the 
company  within  60  days  of  the  receipt  by  the 
foreign  branch  of  information  of  the  decedent's 
death."    (Art.  71.) 

§  195.  Where  military  exemption  claimed. 
The  Regulations  provide: 

1 '  The  executors  of  estates  exempted  from  the 
tax  (see  Art.  9)  are  required  to  file  the  60-day 
notice  with  the  proper  collector  in  the  same 
manner  as  the  executors  of  taxable  estates.  The 
executor  should,  in  addition,  write  across  the 
face  of  the  form  the  words  'Military  exemption 
claimed.'  "     (Art.  72.) 

ESTATES  OF  NONRESIDENTS 

§  196.  Local  executor — When  to  file  notice. 

The  Regulations  provide : 

"A  60-day  notice  on  Form  705  should  be  filed 
with  the  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  by  every  executor  or  admin- 
istrator appointed  in  the  United  States.  The 
notice  is  necessary  if  any  part  of  the  decedent 's 
gross  estate  was  situated  in  the  United  States  at 
the  time  of  death,  regardless  of  the  value  of  that 
part  or  of  the  entire  gross  estate."     (Art.  73.) 


SIXTY-DAY  NOTICE.  177 


Notice  by  person  in  possession. 


197.  Notice  by  person  in  possession. 

The  .Regulations  provide: 

' '  If  no  executor  or  administrator  has  been  ap- 
pointed in  this  country,  notice  must  be  filed 
within  GO  days  of  the  date  of  death  by  every  per- 
son in  possession  of  any  part  of  the  gross  estate 
in  the  United  States.  If  such  person  has  no 
knowledge  of  the  decedent's  death  within  60 
days  of  its  occurrence,  he  should  file  this  notice 
immediately  upon  obtaining  such  knowledge. 
The  filing  of  notice  by  a  foreign  executor  or  ad- 
ministrator does  not  relieve  persons  in  posses- 
sion from  the  duty  of  filing  notice.  If  there  is 
a  delay  in  the  appointment  of  a  local  executor 
or  administrator  of  more  than  60  days  after  the 
death,  persons  in  possession  should  file  notice. 
The  term  'person  in  possession  of  property  of 
the  decedent'  includes  the  decedent's  agents  or 
representatives;  donees  and  transferees  or  trus- 
tees of  property  transferred  in  contemplation 
of  death;  the  surviving  owner  of  property  held 
jointly;  safe-deposit  companies,  warehouse  com- 
panies, and  similar  custodians  of  property  in 
this  country  of  a  nonresident  decedent;  brokers 
holding  as  collateral  securities  belonging  to  the 
decedent  or  investment  funds  owned  by  the  de- 
cedent; banking  institutions  holding  money  on 
deposit  or  for  any  specific  purpose,  such  as  pur- 
chase of  goods,  if  the  title  rests  in  the  decedent; 
and  debtors  of  the  decedent  in  this  country." 
(Art.  73.) 


178  FEDERAL  ESTATE  TAX. 

Resident    estates — Notice    by   transfer    agent. 

§  198.  Comparison  with  rule  in  case  of  resident  es- 
tates. 
Analysis  of  the  respective  rules  indicates  that  in 
one  respect  the  rule  laid  down  for  the  estates  of  resi- 
dents is  more  sweeping  than  that  applied  to  the  es- 
tates of  nonresidents.  In  the  latter  case  persons  in 
possession  are  required  to  file  notice  only  where  no 
local  executor  has  been  appointed;  and  this  rule  ap- 
pears to  be  extended  to  property  which  would  never 
come  into  the  possession  of  the  personal  representa- 
tive, such  as  property  received  from  the  decedent  in 
his  life  time  or  obtained  by  survivorship  after  his 
death.  In  the  case  of  resident  estates,  however,  the 
right  is  expressly  reserved  to  require  notice  from  the 
beneficiary,  whether  or  not  an  executor  has  been  ap- 
pointed, with  reference  to  property  not  coming  into 
the  possession  of  the  executor.9 

§  199.  Notice  by  transfer  agent. 

The  Regulations  provide: 

"A  60-day  notice  upon  Form  714  is  required 
to  be  filed  whenever  a  corporation,  its  transfer 
agent,  register,  or  paying  agent,  is  called  upon 
to  make  a  transfer  of  stocks  or  bonds,  or  to  pay 
interest  or  dividends,  to  any  successor  in  inter- 
est of  any  nonresident  stockholder  or  bond- 
holder who  died  after  September  8,  1916,  unless 
the  transfer  is  made  upon  the  order  of  an  execu- 
tor or  administrator  appointed  in  the  United 

9.  See  pp.  172-3. 


SIXTY-DAY  NOTICE.  179 

Notice  by  transfer  agent. 

States.    The  notice  is  required  for  dividends  de- 
clared prior  to  the  day  of  death,  and  for  interest 
which  had  accrued  on  bonds  prior  to  the  death 
of   the   decedent   although   payable   thereafter. 
Notice  should  be  filed  with  the  Commissioner  of 
Internal  Revenue  at  Washington,  D.  C,  within 
60  days  of  the  date  of  death,  or  immediately 
upon  receipt  of  the  order  of  transfer  or  pay- 
ment.    A  transfer  agent  should  be  vigilant  to 
report  all  cases  in  which  the  fact  of  the  death 
of  a  nonresident  appears.    Where  the  securities 
are  received  without  the  personal  assignment  of 
the  decedent,  but  with  the  transfer  order  of  the 
foreign  executor,  it  is  clear  that  the  case  should 
be  reported.    Where  the  securities  bear  the  per- 
sonal assignment  of  the  decedent,  the  transfer 
should  be  reported  if  made  upon  the  order  of  a 
foreign  executor,  or  if  information  is  received 
in  any  other  manner  that  the  record  owner  has 
died  a  nonresident  of  the  United  States."   (Art. 
74.) 
The  justification  for  this  requirement  appears  to 
be  substantially  the  same  as  for  that  relating  to  in- 
surance companies.10    It  will  be  observed  that  there 
is  no  similar  requirement  for  resident  estates,  in 
which  case  it  is  evidently  considered  safe  to  rely 
upon  information  from  the  executor  or  the  trans- 
feree of  the  stock. 

10.  See  pp.  174-5. 


180  FEDERAL  ESTATE  TAX. 

Explanation  of  rule — Insurance  companies. 


§  200.  Explanation  of  rule. 
The  Regulations  provide: 

1 '  In  order  to  prevent  loss  of  the  tax  upon  non- 
resident estates,  it  is  essential  that  transfer 
agents  should  exercise  great  care  in  reporting 
all  transfers  of  the  kind  described.  Their  rec- 
ords will  be  examined  from  time  to  time  by  in- 
ternal revenue  officers  to  determine  whether  this 
regulation  is  being  strictly  complied  with.  Fail- 
rue  to  file  notice  in  the  manner  prescribed  will 
render  the  transfer  agent  liable  to  a  fine." 
(Art.  75.) 

§  201.  Insurance  companies. 

The  Regulations  provide: 

"The  60-day  notice  upon  Form  788  must  be 
filed  by  every  domestic  insurance  company 
which  pays  insurance  upon  the  life  of  the  non- 
resident decedent  in  any  amount  either  to  a  for- 
eign executor  or  administrator,  or  to  indidvidual 
beneficiaries.  The  notice  should  be  filed  with 
the  Commissioner  of  Internal  Revenue,  Wash- 
ington, D.  C,  within  60  days  of  receipt  of  proof 
of  claim.  No  notice  is  required  to  be  filed,  if  the 
only  insurance  paid  is  receivable  by  an  execu- 
tor appointed  in  the  United  States.  If,  however, 
the  company  is  liable  to  give  notice,  it  is  re- 
quired to  report  insurance  of  all  classes  in  order 
that  its  statement  may  be  complete."  (Art.  76.) 
This  ruling  requires  notice  where  the  company 
has  a  policy  payable  to  a  beneficiary  other  than  the 


SIXTY-DAY  NOTICE.  181 

Foreign  policies. 


executor,  although  for  less  than  $40,000;  and  where 
notice  is  thus  necessary  it  is  required  to  give  notice 
also  of  insurance  payable  to  the  local  executor,  al- 
though this  of  itself  would  not  be  a  subject  for  no- 
tice. The  requirement  for  notice  of  individual  in- 
surance less  than  $40,000  might  seem  unnecessary. 
Lt  is  of  practical  importance,  however,  since  the  de- 
cedent may  have  taken  out  similar  insurance  with 
other  companies,  and  the  aggregate  amount  might 
exceed  $40,000.  The  requirement  is  not  limited,  as 
in  the  case  of  resident  estates,  to  cases  in  which  the 
company  has  knowledge  of  other  insurance  sufficient 
to  make  the  total  amount  more  than  $40,000. " 

§  202.  Same — Foreign  policies. 

Since  the  statute  provides  for  the  inclusion  in  the 
gross  estate  of  insurance  taken  with  ' 'a  domestic  cor- 
poration" regardless  of  other  circumstances,12  the 
company  is  required  to  give  the  60-day  notice  with 
reference  to  insurance  taken  out  by  a  nonresident 
with  a  local  branch  of  the  company  in  a  foreign 
country,  and  paid  out  of  funds  kept  on  deposit  in 
that  country,  as  required  by  the  local  law. 

11.  See  p.  174. 

12.  See  Sec.  403. 


CHAPTER  VI. 

RETURN. 

RESIDENT   ESTATES. 

§  203.  The  statute. 
The  statute  provides: 

' '  The  executor  shall  also,  at  such  times  and  in 
such  manner  as  may  be  required  by  regulations 
made  pursuant  to  law,  file  with  the  collector  a 
return  under  oath  in  duplicate,  setting  forth  (a) 
the  value  of  the  gross  estate  of  the  decedent  at 
the  time  of  his  death,  or,  in  case  of  a  nonresi- 
dent, of  that  part  of  his  gross  estate  situated  in 
the  United  States;  (b)  the  deductions  allowed 
under  section  403;  (c)  the  value  of  the  net  estate 
of  the  decedent  as  defined  in  section  403;  and 
(d)  the  tax  paid  or  payable  thereon;  or  such 
part  of  such  information  as  may  at  the  time  be 
ascertainable  and  such  supplemental  data  as 
may  be  necessary  to  establish  the  correct  tax. 

''Return  shall  be  made  in  all  cases  where  the 
gross  estate  at  the  death  of  the  decedent  exceeds 
$50,000,  and  in  the  case  of  the  estate  of  every 
nonresident  any  part  of  whose  gross  estate  is 
situated  in  the  United  States.  If  the  executor 
is  unable  to  make  a  complete  return  as  to  any 
part  of  the  gross  estate  of  the  decedent,  he  shall 
include  in  his  return  a  description  of  such  part 
and  the  name  of  every  person  holding  a  legal  or 
beneficial  interest  therein,  and  upon  notice  from 
the  collector  such  person  shall  in  like  manner 

[182] 


THE  RETURN.  183 


Return  by  executor. 


make  a  return  as  to  such  part  of  the  gross  es- 
tate. The  Commissioner  shall  make  all  assess- 
ments of  the  tax  under  the  authority  of  exist- 
ing administrative  special  and  general  provi- 
sions of  law  relating  to  the  assessment  and  col- 
lection of  taxes."  (Sec.  404. )! 
The  Regulations  provide: 

"A  return  on  Form  706  is  required  in  the  case 
of  every  resident  decedent  who  died  on  or  after 
February  25, 1919,  leaving  a  gross  estate  exceed- 
ing $50,000  in  value.  *  *  In  the  case  of  dece- 
dents who  died  before  February  25,  1919,  the 
effective  date  of  the  Revenue  Act  of  1918,  the 
return  is  required  if  the  gross  estate  exceeds 
$60,000,  or  if  there  is  any  net  estate  after  the 
legal  deductions,  including  the  $50,000  exemp- 
tion, have  been  taken.  In  the  case  of  estates  of 
nonresidents  return  is  required  if  the  decedent 
owned  any  property  in  the  United  States  re- 
gardless of  value.     (See  Art.  88.)"     (Art.  77.) 

§  204.  Return  by  executor. 
The  Regulations  provide: 

"The  statute  provides  that  the  executor  or 
administrator  shall  file  the  return.  If  there  is 
more  than  one  executor  or  administrator,  the 

1.  Under  the  Revenue  Act  of  1916,  the  return  was  required 
"in  all  cases  of  estates  subject  to  the  tax  or  where  the  gross 
estate  at  the  death  of  the  decedent  exceeds  $60,000."  (Sec. 
205.)  The  present  requirement  is  more  sweeping,  and  may  in 
certain  cases  require  a  return  where  the  estate  is  not  liable  to 
tax. 


184  FEDERAL  ESTATE  TAX. 

Insufficient   knowledge — Return   by   beneficiary. 

return  must  be  made  jointly  by  all.  *  *  * 
The  executor  or  administrator  is  required  to 
make  a  return  of  the  entire  gross  estate  of  the 
decedent,  including  property  which  will  not 
come  into  his  possession,  such  as  property  trans- 
ferred by  the  decedent  before  death,  and  prop- 
erty owned  by  tenants  in  the  entirety."  (Art. 
80.) 

§  205.  Same — Insufficient    knowledge — Return    by 
beneficiary. 

The  statute  provides: 

"If  the  executor  is  unable  to  make  a  complete 
return  as  to  any  part  of  the  gross  estate  of  the 
decedent,  he  shall  include  in  his  return  a  de- 
scription of  such  part  and  the  name  of  every 
person  holding  a  legal  or  beneficial  interest 
therein,  and  upon  notice  from  the  collector  such 
person  shall  in  like  manner  make  a  return  as  to 
such  part  of  the  gross  estate."    (Sec.  404.) 

The  Regulations  provide: 

"If  the  executor  is  unable  to  make  a  complete 
return  as  to  any  part  of  the  gross  estate,  he  is 
required  to  give  all  the  information  he  has  as  to 
such  property,  including  a  full  description,  and 
the  name  of  every  person  holding  a  legal  or  bene- 
ficial interest  in  the  property.  Where  the  ex- 
ecutor is  unable  to  make  a  return  as  to  any 
property,  the  statute  requires  every  person 
holding  a  legal  or  beneficial  interest  therein, 
upon  notice  from  the  collector,  to  make  return 


THE  RETURN.  185 


Where  no  executor  appointed. 


as  to  such   part  of  the  gross  estate."      (Art. 

80.  )- 
In  accordance  with  this  rule,  it  is  ruled  that  a 
return  may  be  required  from  the  survivor  of  the 
two  joint  owners  of  a  bank  account,  to  whom  the 
money  is  paid  upon  the  decedent's  death. 

§  206.  Where  no  executor  appointed. 
The  statute  provides: 

"The  term  'executor'  means  the  executor  or 
administrator  of  the  decedent,  or,  if  there  is  no 
executor  or  administrator,  any  person  who  takes 
possession  of  any  property  of  the  decedent." 
(Sec.  400.) 
The  Regulations  provide: 

"Where   no   executor   or  administrator   has 
been  appointed,  every  person  in  possession  of 

2.  The  Revenue  Act  of  1916  contained  the  same  provision 
(Sec.  205)  as  Sec.  404.  Although  the  statutory  provisions  are 
the  same,  the  rulings  under  the  former  act  handled  the  matter 
of  the  return  in  a  somewhat  different  way  from  the  present 
Regulations^  Returns  were  divided  into  "tentative"  and 
"final."  (Treasury  Decision  2415,  Dec.  14,  1916;  Treasury 
Decision  2756,  Sept.  5,  1918.)  There  was  an  absolute  require- 
ment that  the  "tentative"  return  should  be  filed  a  year  from 
the  death,  and  should  set  forth  the  condition  of  the  estate  as 
accurately  as  possible.  The  collector  might  then  grant  an 
extension  of  ninety  days  to  file  the  "final"  return,  at  the 
expiration  of  which  period  the  executor  was  required  to  file 
the  "final"  return  or  a  detailed  statement  of  his  reasons  why 
he  could  not  do  so.  (Treasury  Decision  2756,  pp.  304-5.)  The 
present  Regulations  provide  for  a  single  return,  the  character 
of  which  is  not  specified. 


186  FEDERAL  ESTATE  TAX. 

Return  to  be  accepted — Return  by  collector  or  Commissioner. 

any  part  of  the  gross  estate  is  considered  to  be 
an  executor  for  the  purposes  of  the  tax,  and  is 
liable  for  a  return  as  to  the  property  in  his  pos- 
session."    (Art.  80.) 

§  207.  Return  in  proper  form  to  be  accepted. 

The  statute  provides  for  the  filing  of  a  return  in  a 
specified  form,  and  certain  penalties  for  failure  to 
file  and  for  the  filing  of  a  false  return;3  also  for  the 
filing  by  the  collector  or  the  Commissioner  of  a  re- 
turn in  place  of  one  containing  incorrect  or  false 
statements.4  Under  these  circumstances,  it  is  ruled 
that  a  return  in  the  prescribed  form  will  be  accepted, 
even  though  it  shows  on  its  face  that  it  is  not  cor- 
rect— the  executor  being  entitled  in  this  way  to  avoid 
the  penalty  for  failure  to  file,  and  the  remedy  of  the 
Government  being  the  enforcement  of  the  penalties 
and  the  filing  of  a  correct  return  by  the  collector  or 
the  Commissioner. 

§  208.  Return  by  collector  or  Commissioner. 

The  statute  provides: 

"That  if  no  administration  is  gTanted  upon 
the  estate  of  a  decedent,  or  if  no  return  is  filed 
as  provided  in  section  404,  or  if  a  return  con- 
tains a  false  or  incorrect  statement  of  a  ma- 
terial fact,  the  collector  or  deputy  collector  shall 
make  a  return  and  the  Commissioner  shall  as- 
sess the  tax  thereon."     (Sec.  405.) 

3.  Revenue  Act  of  1918,  Sec.  410;  R.  S.,  Sec.  3176  (Comp. 
Sts.,  1916,  Sec.  5899). 

4.  Revenue  Act  of  1918,  Sec.  405. 


THE  RETURN.  18. 


Return   by   collector  or  commissioner. 


The  Revised  Statutes  provide: 

"If  any  person,  corporation,  company,  or  as- 
sociation fails  to  make  and  file  a  return  or  list 
at  the  time  prescribed  by  law  or  by  regulation 
made  under  authority  of  law,  or  makes,  will- 
fully or  otherwise,  a  false  or  fraudulent  return 
or  list,  the  collector  or  deputy  collector  shall 
make  the  return  or  list  from  his  own  knowledge 
and  from  such  information  as  he  can  obtain 
through  testimony  or  otherwise.  In  any  such 
case  the  Commissioner  may,  from  his  own 
knowledge  and  from  such  information  as  he  can 
obtain  through  testimony  or  otherwise,  make  a 
return  or  amend  any  return  made  by  a  collector 
or  deputy  collector.  Any  return  or  list  so  made 
and  subscribed  by  the  Commissioner,  or  by  a  col- 
lector or  deputy  collector,  and  approved  by  the 
Commissioner,  shall  be  prima  facie  good  and 
sufficient  for  all  legal  purposes."  (R.  S.,  Sec. 
3176;  Comp.  Sts.  1916,  Sec.  5899.) 

The  Regulations  provide: 

"The  statute  provides  that  if  no  return  is 
filed  for  the  estate  of  a  decedent,  or  if  a  return 
contains  a  false  or  incorrect  statement  of  a  ma- 
terial fact,  the  collector  or  deputy  collector  shall 
make  a  return.  The  Commissioner  may  amend 
this  return  from  such  knowledge  or  information 
as  he  can  obtain,  through  testimony  or  other- 
wise. A  return  so  made  by  the  Commissioner, 
or  made  by  the  collector  and  approved  by  the 
Commissioner,  is  a  sufficient  basis  for  assessing 
the  tax.    Where  a  tax  is  found  to  be  due  upon 


188  FEDERAL  ESTATE  TAX. 

Time  of  filing — Place  to   file — Investigation  of  returns. 

such  a  return,  the  estate  will  be  liable  for  penal- 
ties as  well  as  for  the  tax."    (Art.  78.  )5 

§  209.  Time  of  filing. 

The  statute  does  not  specify  this.  The  Regula- 
tions provide:  "It  (the  return)  must  be  filed  within 
one  year  after  the  date  of  death,  unless  an  extension 
is  granted."    (Art.  77.) 6 

§  210.  Place  to  file. 

The  Regulations  provide: 

"This  return  must  be  filed  with  the  collector  in 
whose  district  the  decedent  resided."  (Art.  77.) 
This  accords  with  the  provision  of  the  statute  that, 
"The  term  'collector'  means  the  collector  of  internal 
revenue  of  the  district  in  which  was  the  domicile  of 
the  decedent  at  the  time  of  his  death."    (Sec.  400.) 

§  211.  Investigation  of  returns.    , 
The  Regulations  provide: 

"An  investigation  of  every  return  for  estate 
tax  will  be  conducted  to  verify  the  accuracy  of 

5.  There  are  similar  provisions  in  Art.  89. 

6.  This  one  year  period  was  first  fixed  by  the  original  Estate 
Tax  Regulations.  (Treasury  Decision  2378;  Oct.  10,  1916.) 
Treasury  Decision  2415  (Dec.  14,  1916)  states: 

"It  is  obvious  that  the  proper  time  for  return  to  be  made 
is  a  time  coincident,  as  nearly  as  possible,  with  the  final  settle- 
ment of  the  estate  and  the  date  upon  which  the  estate  tax  is 
due.  Since  in  many  States  more  than  a  year  from  the  decedent's 
death  is  allowed  for  administration,  the  time  set  by  the  Regu- 
lations for  the  filing  of  the  return  was  made  coincident  with 
the  due  date  of  the  tax — that  is,  one  year  after  the  decedent's 
death." 


THE  RETURN.  189 


Conduct    of    investigation — Notification. 


the  return.  The  investigation  will  be  made  by 
special  officers  of  the  Bureau.  The  fact  that  an 
investigation  is  made  does  not  reflect  upon  the 
competence  or  good  faith  of  the  executor,  since 
investigations  are  required  in  all  cases  as  a  mat- 
ter of  administrative  procedure.  The  executor 
should  co-operate  with  the  examining  officer  in 
order  that  the  full  tax  liability  may  be  definitely 
determined  and  the  case  closed.  During  the 
course  of  the  investigation  the  examining  officer 
will  inspect  the  books  and  records  of  the  estate, 
interview  the  executor  and  other  persons  having 
knowledge  of  the  decedent's  affairs,  verify  the 
value  of  the  assets  and  the  amounts  of  debts 
and  administration  expenses,  and  take  such 
other  steps  as  may  be  necessary  to  determine  the 
correct  tax."    (Art.  79.) 

§  212.  Time  and  manner  of  conducting  investiga- 
tion— Notification  of  result. 
The  Regulations  provide: 

"It  is  the  purpose  of  the  Bureau  to  make 
these  investigations  as  soon  as  practicable  after 
the  filing  of  the  return.  Whenever  there  are 
special  and  urgent  reasons  for  an  early  investi- 
gation, the  collector  should  be  notified  in  order 
that  the  case  may  be  given  special  attention. 
Upon  completion  of  the  investigation  the  execu- 
tor will  be  apprised  by  the  examining  officer  of 
his  findings,,  and  will  be  given  an  opportunity 
to  discuss  the  case  and  present  such  data  as  he 
may  desire,  to  be  considered  by  the  Bureau  in 


190  FEDERAL  ESTATE  TAX. 

Extension  of  time  to  file  return. 

connection  with  the  examining  officer's  report. 
Upon  the  completion  of  the  review  and  audit  by 
the  Bureau  of  the  return  and  the  examining  of- 
ficer's report,  the  executor  will  be  informed  by 
letter  from  the  Commissioner  of  the  result  of  the 
audit."    (Art.  79.) 

§  213.  Extension  of  time  to  file  return. 

The  Regulations  provide: 

"If  it  is  impossible  for  the  executor  to  file  a 
complete  return  within  a  year  from  the  date  of 
death,  he  may  make  application  to  the  collector 
for  an  extension  of  time  for  filing  the  return, 
stating  in  detail  in  his  application  the  circum- 
stances which  prevent  the  filing  of  the  return 
by  the  due  date  and  setting  forth  briefly  but 
fully  a  statement  of  what  the  gross  estate  con- 
sists, together  with  a  statement  of  the  amount 
of  deductions  claimed,  provided  that  in  the  first 
instance  the  application  be  made  at  least  30  days 
prior  to  the  due  date  of  the  return.  If  the  col- 
lector is  satisfied  that  a  complete  return  can- 
not be  made  he  may  grant  extensions  of  time 
not  to  exceed  180  days  from  the  due  date,  no 
single  extension  exceeding  60  days.  At  the 
expiration  of  the  last  extension  period  granted 
a  return  must  be  filed.  If  at  that  time  it  is  still 
impossible  to  file  a  complete  and  accurate  re- 
turn, on  account  of  the  unsettled  condition  of 
the  affairs  of  the  estate,  the  return  filed  by  the 
executor  must  be  as  complete  as  possible,  and 
must  set  forth  all  the  facts  in  his  possession  as 


THE  RETURN.  191 


Manner  of  executing  return. 


to  the  gross  and  net  estate.  Such  a  return  will 
be  accepted  by  the  collector;  but  the  executor 
must  file  an  amended  return  as  soon  as  the  con- 
dition of  the  estate  permits.  The  granting  of 
an  extension  of  time  for  filing  a  return  does  not 
operate  to  extend  the  time  for  the  payment  of 
the  tax,  which  is  due  one  year  after  decedent's 
death  unless  the  time  for  payment  thereof  be  ex- 
tended by  the  Commissioner,  as  provided  in 
Article  93.  Where  application  has  been  made 
for  an  extension  of  time  to  file  a  return,  but  no 
extension  of  time  for  the  payment  of  the  tax  has 
been  granted,  the  executor  will  be  required  to 
pay  on  the  due  date  a  sum  of  money  sufficient, 
in  the  opinion  of  the  collector,  to  discharge  the 
tax,  even  though  an  extension  of  time  to  file  the 
return  has  been  or  may  be  granted.  The  state- 
ments accompanying  the  application  will  be 
subject  to  investigation  and  verification  in  act- 
ing upon  the  application  for  extension  and  in 
fixing  the  amount  which  the  executor  will  be 
required  to  pay  on  the  due  date  of  the  tax  as 
sufficient  in  the  opinion  of  the  collector  to  dis- 
charge the  tax."    (Art.  81.) 

§  214.  Manner  of  executing  return. 
The  Regulations  provide: 

"The  return  must  be  made  on  Form  706, 
copies  of  which  will  be  supplied  by  the  collector. 
It  must  contain  an  itemized  inventory,  by 
schedule,  of  the  property  constituting  the  gross 
estate,  together  with  a  full  statement  of  deduc- 

13 


192  FEDERAL  ESTATE  TAX. 

Supplemental  data. 

tions  claimed,  as  therein  provided.  The  instruc- 
tions printed  on  the  form  should  be  carefully 
followed.  All  documents  and  vouchers  used  in 
preparing  the  return  should  be  retained  by  the 
executor,  so  as  to  be  available  for  inspection 
whenever  required.  Certified  copies  of  the  will, 
if  any,  must  be  submitted  with  the  return,  to- 
gether with  duplicate  copies  of  the  other  docu- 
ments required  by  the  instructions  printed  on 
the  form,  or  any  documents  which  the  executor 
may  desire  to  submit  with  the  return  in  expla- 
nation thereof. ' '    (Art.  82.) 

§  215.  Supplemental  data. 

The  statute  requires  the  executor  to  file,  in  addi- 
tion to  the  other  matters  specified,  "such  supple- 
mental data  as  may  be  necessary  to  establish  the 
correct  tax."    (Sec.  404.) 
The  Regulations  provide : 

"It  is  therefore  the  duty  of  the  executor  to 
furnish  upon  request  copies  of  any  documents  in 
his  possession  relating  to  the  estate,  or  on  file 
in  any  court  having  jurisdiction  over  the  estate, 
appraisal  lists  of  any  items  included  in  the  gross 
estate,  copies  of  balance  sheets  or  other  finan- 
cial statements  relating  to  the  value  of  stock, 
and  any  other  information  obtainable  by  him 
that  may  be  found  necessary  in  the  determina- 
tion of  the  tax."    (Art.  83.) 

NONRESIDENT  ESTATES. 

§  216.  In  general. 
The  statute  provides  that  "Return  shall  be  made 


THE  RETURN.  l'J.i 


Nonresident   estates — In   general. 


*  *  *  in  the  case  of  the  estate  of  every  nonresi- 
dent any  part  of  whose  gross  estate  is  situated  in  the 
United  States."  (Sec.  404.)  The  size  of  the  estate 
is  in  this  case  immaterial,  since  the  $50,000  exemp- 
tion does  not  apply  to  the  estate  of  a  nonresident, 
(Sec.  403  [b]  ). 
The  Regulations  provide: 

"A  return  on  Form  706  must  be  filed  in  du- 
plicate with  the  Commissioner  of  Internal  Reve- 
nue, Washington,  D.  C,  or  with  such  collector  of 
internal  revenue  as  the  Commissioner  may 
designate,  within  a  year  from  the  date  of  death 
of  every  nonresident  decedent,  if  any  part  of  the 
gross  estate  of  such  decedent  was  situated  in  the 
United  States  at  the  time  of  his  death.  It  is  the 
duty  of  any  executor  or  administrator  appointed 
in  the  United  States  to  file  a  return  for  the  whole 
of  that  part  of  the  gross  estate  situated  in  the 
United  States,  whatever  its  value.  If  there  is 
no  such  executor  or  administrator,  every  person 
in  possession  of  any  part  of  the  gross  estate  in 
the  United  States  may  be  required  to  file  a  re- 
turn for  such  part.  Except  as  otherwise  speci- 
fically provided  by  these  Regulations,  notice 
will  be  given  to  such  persons,  however,  where  a 
return  is  required;  and  they  are  relieved  of  the 
duty  of  filing  returns  by  the  appointment  of  an 
executor  or  administrator  in  the  United  States, 
but  not,  however,  by  the  appointment  of  a 
foreign  executor  or  administrator.  If,  however, 
a  complete  return  is  actually  filed  by  the  foreign 
executors  of  property  in  the  United  States,  the 


194  FEDERAL  ESTATE  TAX. 

Place  to  file — Supplemental  data. 

person  in  possession  need  not  file  a  return,  ex- 
cept as  otherwise  specifically  required  by  these 
Regulations."  (See  Arts.  75-A  and  76-A.) 
(Art.  88.) 

§  217.  Place  to  file. 

It  is  not  entirely  clear  that  the  provision  in  the 
Regulations  for  filing  the  return  with  the  Commis- 
sioner accords  with  the  statute.  The  latter  contains 
a  general  provision  for  filing  returns  "with  the  col- 
lector;" and  it  defines  "collector"  to  mean,  in  the 
case  of  nonresidents,  "the  collector  of  the  district  in 
which  is  situated  the  part  of  the  gross  estate  of  the 
decedent  in  the  United  States,  or,  if  such  part  of  the 
gross  estate  is  situated  in  more  than  one  district, 
then  the  collector  of  internal  revenue  of  such  dis- 
trict as  may  be  designated  by  the  Commissioner." 
(Sec.  400.)  This  would  indicate  a  filing  with  the  col- 
lector in  all  cases,  the  Commissioner  merely  desig- 
nating the  collector  in  the  particular  case  specified. 

§  218.  Supplemental  data. 

The  statute  requires,  in  the  case  of  the  estate  of  a 
nonresident  as  well  as  a  resident,  that  the  executor 
shall  file  "such  supplemental  data  as  may  be  neces- 
sary to  establish  the  correct  tax."    (Sec.  404.) 
The  Regulations  provide: 

"Pursuant  to  this  provision  the  executor  of  a 
nonresident  decedent  is  required  to  file  with  the 
return : 

(1)  Certified  copy  of  will,  or,  if  the  decedent 
left  several  wills,  to  govern  in  different  jurisdic- 
tions, certified  copy  of  each  will. 


THE  RETURN.  195 


Supplemental  data. 


(2)  Certified  copy  of  inventory  of  foreign 
property  filed  under  a  foreign  estate,  succession 
or  death-duty  act;  or,  if  no  such  inventory  was 
filed,  copy  of  inventory  filed  with  the  foreign 
court  of  probate  jurisdiction. 

(3)  Certified  copy  of  schedule  of  claims  filed 
under  a  foreign  taxing  act  in  cases  where  such 
claims  are  presented  for  deduction.  If  any  item 
of  deduction  is  not  included  in  the  schedule,  the 
affidavit  of  the  foreign  executor  or  administrator 
with  reference  thereto  should  be  submitted. 

The      specified      information      is      required 
whether  or  not  the  executor  wishes  to  claim  de- 
duction, and  is  subject  to  the  provision  of  the 
statute  (see  Sec.  403)  requiring  him  to  include 
in  his  return  the  value  of  the  gross  estate  situ- 
ated in  the  United  States."     (Art.  84.) 
This  requirement  is,  in  substance,  that  the  estate 
of  a  nonresident  must  file  a  complete  statement  of 
all  property,  wherever  situated,  and  whether  or  not 
deductions  are  claimed,  so  that  the  statutory  provi- 
sion comes  into  play.     (See  Sec.  403.)     As  foreign 
property   is   not   subject   to   tax,  the   point   arises 
whether  a  statement  concerning  it  may  be  required. 
If  it  were  not  required,  questions  would  certainly 
arise.     The  executor,  for  instance,  might  consider 
that  the  stock  of  a  domestic  corporation  was  not 
situated  in  this  country  if  the  certificates  were  held 
abroad,   or   that   bonds,    although   situated    in    the 
United  States,  had  the  situs  of  the  domicile  of  the 
nonresident  owner.     The  regulation  seems  to  be  a 
reasonable  one,  and  not  to  have  met  with  serious 
opposition. 


CHAPTER  VII. 
PAYMENT  OF  TAX. 

§  219.  Due  date  of  tax. 

The  statute  provides: 

"That  the  tax  shall  be  due  one  year  after  the  de- 
cedent's death."  (See  406.)  The  Regulations  pro- 
vide: "The  tax  is  due  and  payable  one  year  from 
the  date  of  death."  (Art.  90.)  There  is,  however, 
no  liability  for  interest  if  payment  is  made  one  year 
and  180  days  from  the  date  of  death.  (Sec.  406.) 
The  Bureau,  however,  reserves,  in  general,  the 
right  to  collect  the  tax  at  any  time  after  the  expira- 
tion of  a  year  from  the  death.1 

§  220.  When  payment  effected. 

The  Regulations  have  nothing  specific  on  this 
head.     It  is  ruled,  however,  that  payment  is  not 

1.  See  communication  of  Deputy  Commissioner  Hagerman  to 
the  Corporation  Trust  Company  of  June  24,  1920.  This  letter 
states:  "There  is  nothing  contained  in  Section  408  of  the 
Revenue  Act  of  1918  which  fixes  a  different  date  for  the  pay- 
ment of  the  tax  than  that  specifically  set  forth  in  Section  406 
thereof,  nor  is  there  anything  contained  therein  which  prohibits 
the  collection  of  the  tax  at  any  time  after  it  is  due.  *  *  * 
Payment  of  estate  taxes,  therefore,  may  not  be  withheld  for  a 
period  of  one  year  and  one  hundred  and  eighty  days  after  de- 
cedent's death  by  those  liable  therefor."  Sec.  408  provides 
that  "if  the  tax  *  *  *  is  not  paid  within  180  days  after  it 
is  due,  the  collector  shall  *  *  *  proceed  to  collect,"  etc. 
This  provision  is  treated  as  being  merely  a  limitation  of  the  time 
that  the  collector  may  wait. 

[196] 


PAYMENT  OF  TAX.  197 

Collectible  from  executor — From  others. 

effected  until  the  receipt  of  the  money  by  the  col- 
lector. The  date  of  mailing  is  not  the  date  of  pay- 
ment.1" This  ruling  is  applied  even  though  the  fail- 
ure to  get  the  money  to  the  collector  in  time  was  due 
to  incorrect  advice  given  by  him  to  the  executor.2 

§  221.  Collectible  from  executor. 

The  statute  provides:  "That  the  executor  shall 
pay  the  tax  to  the  collector  or  deputy  collector." 
(Sec.  407.)  The  Bureau  construes  the  words  "the 
tax"  to  mean  the  whole  tax.  The  Regulations 
provide : 

"The  statute  provides  that  the  executor  shall 
pay  the  tax.  This  duty  applies  to  the  tax  upon 
the  transfer  of  the  entire  estate,  including  prop- 
erty which  will  not  come  into  the  possession 
of  the  executor  or  administrator."     (Art.  92.) 

§  222.  Remedy  against  transferee  or  insurance  bene- 
ficiary. 
The  statute  provides: 

"If  (a)  the  decedent  makes  a  transfer  of,  or 
creates  a  trust  with  respect  to,  any  property  in 
contemplation  of  or  intended  to  take  effect  in 

la.  There  is  a  specific  ruling  to  this  effect  with  reference  to 
the  income  tax.    Regulations  No.  45,  Art.  1007. 

2.  This  accords  with  the  general  rule  that  the  Government 
is  not  responsible  for  the  laches  of  its  agents.  In  the  case 
referred  to  it  was  ruled  that  there  had  been  default  in  pay- 
ment, and  that  a  consequent  interest  liability  had  been  incurred; 
but  that  the  case  was  a  proper  one  for  compromise. 


198  FEDERAL  ESTATE  TAX. 

Right  of  beneficiaries  to  reimbursement. 

possession  or  enjoyment  at  or  after  his  death 
(except  in  the  case  of  a  bona  fide  sale  for  a  fair 
consideration  in  money  or  money's  worth)  or 
(b)  if  insurance  passes  under  a  contract  exe- 
cuted by  the  decedent  in  favor  of  a  specific  bene- 
ficiary, and  if  in  either  case  the  tax  in  respect 
thereto  is  not  paid  when  due,  then  the  trans- 
feree, trustee,  or  beneficiary  shall  be  personally 
liable  for  such  tax,  and  such  property,  to  the  ex- 
tent of  the  decedent's  interest  therein  at  the  time 
of  such  transfer,  or  to  the  extent  of  such  bene- 
ficiary's interest  under  such  contract  of  insur- 
ance, shall  be  subject  to  a  like  lien  equal  to  the 
amount  of  such  tax."  (Sec.  409. )3 
The  Regulations  provide: 

"The  amounts  of  the  lien  and  of  the  personal 
liability  of  the  transferee,  trustee,  or  insurance 
beneficiary  are  limited  to  the  amount  of  the  tax 
upon  the  transfer  of  the  particular  property  in 
the  possession  of  the  person  liable."    (Art.  101.) 
The  above  statutory  provisions  do  not  limit  the 
right  of  the  Government  to  look  to  the  executor  for 
payment.    If  the  tax  with  reference  to  this  particu- 
lar property  remains  unpaid,   additional  remedies 
are  given  for  its  collection. 

§  223.  Right  of  beneficiaries  to  reimbursement. 
The  statute  provides: 

"If  the  tax  or  any  part  thereof  is  paid  by,  or 
collected  out  of  that  part  of  the  estate  passing  to 

3.  See  further  as  to  lien,  pp.  226-7. 


PAYMENT  OF  TAX.  19!* 

Right  of  beneficiaries  to  reimbursement. 

or  in  the  possession  of,  any  person  other  than 
the  executor  in  his  capacity  as  such,  such  per- 
son shall  be  entitled  to  reimbursement  out  of 
any  part  of  the  estate  still  undistributed  or  by 
a  just  and  equitable  contribution  by  the  persons 
whose   interest  in  the  estate  of  the   decedent 
would  have  been  reduced  if  the  tax  had  been 
paid  before  the  distribution  of  the  estate  or 
whose  interest  is  subject  to  equal  or  prior  lia- 
bility for  the  payment  of  taxes,  debts,  or  other 
charges  against  the  estate,  it  being  the  purpose 
and  intent  of  this  title  that  so  far  as  is  practic- 
able and  unless  otherwise  directed  by  the  will 
of  the  decedent  the  tax  shall  be  paid  out  of  the 
estate  before  its  distribution."     (Sec.  408.) 
These  provisions  differ  in  character  from  those 
considered  in  the  preceding  section,  in  that  they  do 
not  merely  give  an  additional  remedy  to  the  Gov- 
ernment, but  indicate  the  manner  in  which  it  was 
intended  that  the  tax  should  ultimately   be  paid. 
Two  purposes  appear:  (a)  the  general  purpose  that 
the  tax  shall  be  paid  before  the  distribution  of  the 
estate  (in  which  case,  if  there  was  a  will,  the  burden 
falls  upon  the  residuary  legatee) ;  and  (b)  that,  if 
not  so  paid,  no  particular  beneficiary  or  class  of 
beneficiaries  shall  pay  more  than  his  or  their  propor- 
tion of  the  tax. 

The  Regulations  provide: 

"Two  rights  are  here  given.  Persons  in  pos- 
session of  property,  and  paying  the  tax,  are  en- 
titled to  reimbursement,  either  out  of  the  un- 


200  FEDERAL  ESTATE  TAX. 

Insurance  beneficiaries. 

distributed  estate  or  by  contribution  from  other 
beneficiaries,  of  any  excess  of  the  amount  paid 
over  the  amount  of  the  tax  upon  the  particular 
property  in  their  possession. "     (Art.  98.) 

§  224.  Same — Insurance  beneficiaries. 
The  statute  provides: 

"If  any  part  of  the  gross  estate  consists  of 
proceeds  of  policies  of  insurance  upon  the  life 
of  the  decedent  receivable  by  a  beneficiary  other 
than  the  executor,  the  executor  shall  be  entitled 
to  recover  from  such  beneficiary  such  portion 
of  the  total  tax  paid  as  the  proceeds,  in  excess 
of  $40,000,  of  such  policies  bear  to  the  net  es- 
tate.   If  there  is  more  than  one  such  beneficiary 
the  executor  shall  be  entitled  to  recover  from 
such  beneficiaries   in   the  same  ratio."      (Sec. 
408.) 
The  Regulations  provide:     "The  executor  is  also 
entitled  to  require  beneficiaries  under  insurance  poli- 
cies to  bear  their  proportion  of  the  tax."    (Art.  98.) 
These   provisions   are   different  from   those   con- 
sidered in  the  preceding  section.     The  policy  there 
disclosed  was  to  require  payment  of  the  tax  out  of 
the  general  estate  in  the  hands  of  the  executor  be- 
fore its  distribution.     The  provisions  last  quoted 
are  in  aid  of  such  general  estate.     The  taxable  in- 
surance is  treated  as  a  part  of  it.    Where  there  is  a 
will,  the  residuary  legatee  would  not  pay  the  entire 
tax.     The  executor  would  recover  part  of  it  from 
the  insurance  beneficiaries  for  his  benefit. 


PAYMENT  OF  TAX.  201 

Right  to  reimbursement  not  enforcible — No  discount. 

§  225.  Same — Right  to  reimbursement  not  enforci- 
ble by  Bureau. 
While  outlining  certain  rights  on  the  part  of  bene- 
ficiaries of  the  estate,  who  have  paid  more  than  their 
share  of  the  tax,  the  statute  does  not  require  the 
Bureau  to  enforce  these  rights.     On  the  contrary, 
such  rights  are  predicated  upon  a  tax  payment,  no 
part  of  which   is   required   to   be   refunded.      The 
remedy  is  not  against  the  Government,  but  against 
other  persons  or  property,  specifically  described. 
The  Regulations  provide: 

"  These  provisions,  however,  are  not  designed 
to  curtail  the  right  of  the  Bureau  to  collect  the 
tax  from  any  person,  or  out  of  any  property, 
liable  therefor.  The  Bureau  may  not  be  required 
to  apportion  the  tax  among  the  persons  liable. 
For  example,  where  a  transfer  has  been  made  in 
contemplation  of  death,  the  Bureau  may  hold 
both  the  executor  and  the  transferee  liable  with 
respect  to  the  tax  upon  the  property  trans- 
ferred. In  such  case,  if  the  tax  is  paid  by  the 
executor,  he  may  not  look  to  the  Bureau  for 
relief  by  refund  of  part  of  the  tax."    (Art.  98.) 

§  226.  No  discount. 

The  present  statute  does  not  contain  the  former 
provision  for  discount.4 

4.  Revenue  Act  of  1916  (Sec.  204),  providing  that,  "If  the 
tax  is  paid  before  it  is  due  a  discount  at  the  rate  of  five  per 
centum  per  annum,  calculated  from  the  time  payment  is  made 
to  the  date  when  the  tax  is  due,  shall  be  deducted." 


202  FEDERAL  ESTATE  TAX. 


Necessity  of  return — Payment  by  bonds,  etc. 

The  Regulations  provide : 

"No  discount  will  be  allowed  for  payment  in 
advance  of  the  due  date."    (Art.  90.) 

§  227.  Necessity  of  return. 
The  Regulations  provide : 

"Payment  will  not  be  accepted  before  a  re- 
turn in  proper  form  has  been  filed. ' '     ( Art.  90. ) 4* 

§  228.  Payment  by  bonds  or  uncertified  check. 
The  Regulations  provide: 

"Payment  of  the  estate  tax  may  be  made  by 
the  delivery  of  Liberty  Bonds  or  other  bonds  of 
the  United  States  bearing  interest  at  a  higher 
rate  than  4  per  cent  per  annum,  provided  they 
were  owned  by  the  decedent  for  at  least  six 
months  prior  to  the  date  of  his  death.  Such 
bonds  are  received  in  payment  to  the  amount  of 
par  and  interest  accrued  at  the  time  of  the  pay- 
ment."   (Art.  91. )5 

4a.  Except  where  the  time  to  file  return  has  been  extended. 
See  Article  90  in  full  (infra,  p.  398). 

5.  See  in  this  connection  Treasury  Decisions  2802  and  2905 
(pp.  312-39,  342-50),  giving  full  details  as  to  payment  of  the 
estate  tax  with  Liberty  Bonds. 

See,  in  this  connection,  Ullmann  v.  Smietauka  (U.  S.  Dist.  Ct., 
N.  D.  of  111.;  not  yet  reported),  holding  that,  where  Liberty 
Bonds  are  converted  into  bonds  of  a  later  issue,  the  date  of  ac- 
quisition of  the  earlier  securities  determines  the  length  of  the 
decedent's  holding, — the  later  bonds  merely  evidencing  the  same 
debt. 


PAYMENT  OF  TAX.  203 

Interest — The  statute. 

§  229.  Interest— The  statute. 

The  statute  provides: 

"If  the  tax  is  not  paid  within  one  year  and 
180  days  after  the  decedent's  death,  interest  at 
the  rate  of  6  per  centum  per  annum  from  the 
expiration  of  one  year  after  the  decedent's  death 
shall  be  added  as  part  of  the  tax."    (Sec.  406.) 

It  also  provides: 

"If  the  amount  of  the  tax  can  not  be  deter- 
mined, the  payment  of  a  sum  of  money  sufficient, 
in  the  opinion  of  the  collector,  to  discharge  the 
tax  shall  be  deemed  payment  in  full  of  the  tax, 
except  as  in  this  section  otherwise  provided. 
*  *  *  If  the  amount  of  the  tax  as  finally  de- 
termined exceeds  the  amount  so  paid,  the  col- 
lector shall  notify  the  executor  of  the  amount  of 
such  excess  and  demand  payment  thereof.  If 
such  excess  part  of  the  tax  is  not  paid  within 
thirty  days  after  such  notification,  interest  shall 
be  added  thereto  at  the  rate  of  10  per  centum 
per  annum  from  the  expiration  of  such  thirty 
days'  period  until  paid."     (Sec.  407. )5a 

5a.  The  tax  is  sometimes  described  as  "original,"  or  "excess" 
or  "additional"  tax,  according  to  whether  it  is  set  out  in  the 
return,  or  disclosed  by  investigation  and  notified  to  the  execu- 
tor. The  statute,  however,  uses  the  words  "the  tax,"  meaning 
the  entire  tax.  It  refers,  however,  to  the  "excess"  of  such 
entire  tax  over  the  amount  originally  paid  by  the  executor; 
also  to  "such  excess  part  of  the  tax." 

Under  the  Revenue  Act  of  1916,  this  excess  tax  bore  interest 
"from  the  time  of  such  notification"  (Sec.  207),  instead  of  30 
days  from  notification,  as  provided  by  the  present  statute. 


204  FEDERAL  ESTATE  TAX. 

What  constitutes  notification? 

§  230.  Same — Interest  on  original  part  of  the  tax. 
The  Regulations  provide: 

"The  statute  provides  that,  if  the  tax  is  not 
paid  within  one  year  and  180  days  after  the  de- 
cedent's death,  interest  at  six  per  centum  per 
annum  from  the  expiration  of  one  year  after  the 
decedent's  death  shall  be  added  as  part  of  the 
tax.  This  provision  applies  to  the  original 
amount  of  tax  shown  to  be  due  by  the  return  ac- 
cepted by  the  collector.  It  applies  in  all  cases 
in  which  penalties  have  not  accrued  under  the 
Revenue  Act  of  1916."    (Art.  94.) 

§  231.  Interest  on  excess  part  of  the  tax. 

The  Regulations  provide: 

"If  an  unpaid  balance  of  tax  is  found  to  be 
due  by  the  Commissioner  after  investigation, 
the  statute  provides  that  interest  shall  be  added 
to  the  amount  of  such  excess  part  of  the  tax  at 
the  rate  of  ten  per  centum  from  the  expiration 
of  30  days  after  notification  to  the  executor,  pro- 
vided the  tax  is  not  paid  within  such  30-day 
period.  This  interest  will  not  begin  to  accrue, 
however,  until  the  expiration  of  one  year  and 
180  days  after  the  decedent's  death."    (Art.  96.) 

§  232.  What  constitutes  notification? 

It  has  been  ruled  that  the  time  of  the  notification 
of  the  excess  part  of  the  tax  "is  the  date  on  which 
notice  of  the  amount     *     *     *     is  received  bv  the 


PAYMENT  OF  TAX.  205 

Interest  where  amount  shown  by  return  is  paid  in  good  faith. 

executor,  whether  such  notice  is  given  by  mail  or 
otherwise."6 


§  233.  Interest  where  amount  shown  by  return  is 
paid  in  good  faith. 
The  words  "the  tax,"  as  used  in  both  Sections 
406  and  407  of  the  statute,  can  only  mean  "the  whole 
tax,"  "the  entire  tax."  Consequently,  under  the 
provisions  of  Section  406,  considered  alone,  nothing 
except  payment  of  the  entire  amount  finally  found  to 
be  due  would  prevent  the  accrual  of  interest  upon 
such  amount  at  the  rate  of  six  per  cent,  commencing 
one  year  from  the  death.  Such  a  result,  however, 
would  seem  to  be  inequitable,  since  the  exact  amount 
of  the  tax  depends  upon  an  accurate  valuation  of  the 
property  constituting  the  gross  estate,  and  an  accur- 
ate estimate  of  the  deductions ;  and  as  to  these  mat- 

6.  Treasury  Decision  2770;  Nov.  6,  1918.  This  ruling  was 
made  with  reference  to  the  provision  of  Sec.  207  of  the  Revenue 
Act  of  1916  that  interest  upon  the  excess  tax  runs  "from  the 
time  of  such  notification."  There  is  authority  in  support  of 
the  ruling,  holding  that  where  notification  is  given  by  mailing, 
the  date  thereof  is  the  date  of  receipt  of  the  notice,  not  the 
date  of  mailing.  Chase  v.  Inhabitants  of  Surry,  88  Me.  408, 
34  Atl.  Rep.  270;  Castner  v.  Farmers  Mutual  Fire  Ins.  Co.,  50 
Mich.  273, 15  N.  W.  Rep.  452. 

The  same  ruling  would  naturally  be  expected  under  Sec.  407 
of  the  present  statute,  providing  for  interest  to  run  at  the 
expiration  of  thirty  days  from  notification.  Treasury  Decision 
2770  does  not  appear  to  be  "inconsistent"  with  anything  con- 
tained in  the  present  Regulations,  and  is  consequently  not 
revoked.     (See  Art.  121.) 


206  FEDERAL  ESTATE  TAX. 

Interest  where  amount  shown  by  return  is  paid  in  good  faith. 

ters  the  executor  and  the  Bureau  might  not  agree, 
even  though  both  were  acting  in  entire  good  faith. 

The  danger  of  injustice  in  this  respect  is  obviated 
by  a  somewhat  liberal  construction  of  Section  407 
of  the  statute,  and  the  treatment  of  such  cases  as 
cases  in  which  "the  amount  of  the  tax  can  not  be 
determined." 
The  Regulations  provide: 

"Payment  of  the  amount  of  tax  shown  to  be 
due  by  a  return  accepted  by  the  collector,  exe- 
cuted in  good  faith  and  accurate  so  far  as  the 
knowledge  of  the  executor  extends,  will  be  con- 
sidered payment  of  the  tax  in  full  except  as  ad- 
justment of  the  tax  results  from  investigation. 
If  at  the  time  payment  is  made  the  exact  amount 
of  the  tax  can  not  be  determined,  the  payment 
of  a  sum  of  money  sufficient,  in  the  opinion  of 
the  collector,  to  discharge  the  tax  will  be  con- 
sidered payment  in  full  except  as  the  tax  is  ad- 
justed after  investigation.  (See  Arts.  78,  95.) 
The  amount  sufficient,  in  the  opinion  of  the  col- 
lector, to  discharge  the  tax  is  such  sum  as  the 
collector  may  specify  after  having  received  a 
return  in  proper  form  containing  an  accurate 
statement  of  all  the  information  in  the  execu- 
tor's possession."  (Art.  90.) 
Where  the  collector  makes  no  such  specification, 
he  is  deemed  to  accept  as  sufficient  the  amount  paid 
by  the  executoi. 


PAYMENT  OF  TAX.  207 

Errors  in   computation — Collector's  decision. 

§  234.  Same — Good  faith  essential. 
The  Regulations  provide: 

"If  the  return  filed  contains  a  gross  or  fraudu- 
lent misstatement  of  fact,  the  payment  of  the 
amount  of  tax  shown  to  be  due  thereby  will 
not  be  deemed  to  be  payment  in  full  of  the  tax, 
since  the  collector's  decision  is  based  upon  the 
assumption  that  the  return  is  made  in  good 
faith."     (Art.  90.) 

§  235.  Errors   in   computation — Payments   slightly 
overdue. 

Similarly,  where  an  honest  return  is  filed,  and  the 
executor,  acting  in  good  faith,  attempts  to  pay  the 
tax,  but  by  reason  of  an  error  in  computation  pays 
too  little,  and  the  collector  fails  to  discover  the  error 
and  accepts  the  payment,  it  is  ruled  that  additional 
tax  bears  interest  only  after  notification.  And  the 
same  ruling  is  made  where,  by  obvious  inadvertence, 
payment  is  made  a  few  days  after  the  expiration  of 
the  time  fixed  by  the  statute,  and  the  collector  ac- 
cepts it  without  protest. 

§  236.  Same — Opinion  of  the  collector — Return 
denying  tax  liability. 
In  cases,  however,  in  which  the  executor  fails  to 
pay  the  true  amount  of  the  tax  the  interest  liability 
specified  in  Section  406  is  incurred  unless  the  case 
falls  within  the  provisions  of  Section  407.  And  one 
of  the  requirements  of  the  latter  is,  that  the  collector 

14 


208  FEDERAL  ESTATE  TAX. 

Necessity  of  payment. 

shall  form  an  " opinion' '  as  to  what  is  a  sum  of 
money  sufficient  to  discharge  the  tax.  This  appears 
to  be  a  question  of  fact ;  and  it  would  seem  that  each 
case  depends,  to  a  certain  extent,  upon  its  own  par- 
ticular circumstances.  Where  the  executor  files  a 
return  denying  liability,  and  the  investigation  of  the 
Bureau  discloses  a  small  tax,  due  to  the  revision  of 
valuations,  or  the  disallowance  of  deductions,  none  of 
the  matters  reflecting  upon  the  good  faith  of  the 
executor,  the  case  seems  reasonably  to  fall  within 
the  ruling  applied  where  the  return  shows  a  tax 
liability  and  the  amount  is  paid;  and  it  is  accordingly 
ruled  in  such  cases  that  interest  runs  only  after  noti- 
fication. On  the  other  hand,  where  the  return  dis- 
closes a  manifest  error  on  the  part  of  the  executor, 
such  as  the  omission  of  taxable  property  the  exist- 
ence of  which  is  disclosed,  in  consequence  of  which 
the  return  asserts  an  absence  of  liability,  it  is  not 
reasonable  to  infer  that  the  collector  shares  the  mis- 
take and  concurs  in  the  opinion  of  the  executor;  and 
in  such  a  case  interest  runs  as  provided  in  Section 
406,  without  notification. 

§  237.  Same — Necessity  of  payment. 

Another  of  the  requirements  of  Section  407  is  pay- 
ment of  the  sum  which,  in  the  opinion  of  the  collec- 
tor, is  sufficient  to  discharge  the  tax.  Consequently 
where  a  return  is  filed  showing  a  tax  liability,  and 
the  amount  is  not  paid,  the  case  is  governed  by  Sec- 
tion 406;  and  interest  begins  to  run  one  year  from 
the  death,  both  upon  the  amount  shown  to  be  due 


PAYMENT  OF  TAX.  209 

Extension  of  time  to  pay  tax. 

by  the  return  and  upon  any  additional  tax  disclosed 
by  investigation. 

§  238.  Extension  of  time  to  pay  tax — Conditions. 

The  statute  provides,  that  "in  any  case  where  the 
Commissioner  finds  that  payment  of  the  tax  within 
one  year  after  the  decedent's  death  would  impose 
undue  hardship  upon  the  estate,  he  may  grant  an 
extension  of  time  for  the  payment  of  the  tax  for  a 
period  not  to  exceed  three  years  from  the  due  date." 
(Sec.  406.) 
The  Regulations  provide: 

"In  any  case  where  the  Commissioner  finds 
that  payment  of  the  tax  within  one  year  after 
the  decedent's  death  would  impose  undue  hard- 
ship upon  the  estate,  extensions  of  time  will  be 
granted  for  the  payment  of  the  tax  for  a  period 
not  to  exceed  in  all  three  years  from  the  due 
date.  Extensions  of  time  for  tax  payment  will 
be  granted  only  in  exceptional  cases,  where  it 
is  evident  that  the  payment  of  the  tax  within 
the  statutory  period  would  cause  the  estate  seri- 
ous financial  loss.  No  extension  shall  be  for 
more  than  one  year,  and  a  substantial  payment 
shall  be  made  before  each  extension.  Applica- 
tion for  extension  of  time  for  payment  should 
be  filed  with  the  collector,  and  should  contain 
a  full  statement  of  the  facts  upon  which  the  ap- 
plication is  based.  The  collector  will  refer  the 
application  to  the  Commissioner,  with  suitable 
recommendations."     (Art.  93.) 


210  FEDERAL  ESTATE  TAX. 

"Undue  hardship" — Interest. 

§  239.  "Undue  hardship." 

The  statute  does  not  define  of  what  "undue  hard- 
ship" consists;  and  it  is  plain  that  a  large  amount 
of  discretion  is  vested  in  the  Commissioner.  Its 
exercise  is  a  rather  delicate  matter,  requiring  an  ad- 
justment of  the  conflicting  claims  of  the  Govern- 
ment for  money,  and  of  the  executor  for  a  reasonable 
chance  to  administer  the  estate  without  sacrificing 
the  assets.  The  only  absolutely  safe  course  for  the 
executor  is  to  be  prepared  to  pay  the  tax  when  due. 

§  240.  Same — Interest. 
The  Regulations  provide: 

"An  extension  of  time  for  tax  payment  will 
not  operate  to  prevent  the  accrual  of  interest 
upon  the  tax."    (Art.  93.) 

§  241.  Same — Does  not  affect  time  to  file  return. 
The  Regulations  provide: 

"The  extension  of  time  for  the  payment  of 
the  tax  should  not  be  confused  with  extension 
of  time  for  filing  the  return.  An  extension  of 
time  to  pay  the  tax  does  not  relieve  from  the 
duty  of  filing  the  return  within  one  year  from 
the  date  of  death."     (Art.  93.) 

§  242.  Interest  under  Revenue  Act  of  1916 — Default 
incurred. 
Where  the  decedent  died  prior  to  February  25, 
1919,  it  is  often  necessary  to  consider  the  provisions 
of  Title  II  of  the  Revenue  Act  of  1916,  since  the  pres- 
ent statute  provides  that  said  Title  "shall  remain 


PAYMENT  OF  TAX.  211 

Interest  under  Revenue  Act  of  1916. 

in  force  for  the  assessment  and  collection  of  all  taxes 
which  have  accrued  thereunder,  and  for  the  imposi- 
tion and  collection  of  all  penalties  or  forfeitures 
which  have  accrued  and  may  accrue  in  relation  to 
any  such  taxes."    (Sec.  1400  [b]). 

The  Revenue  Act  of  1916  provides  that  if  the  tax 
is  not  paid  within  a  year  and  ninety  days  from  the 
death,  interest  at  10  per  cent,  computed  from  the 
date  of  death,  " shall  be  added  as  part  of  the  tax."7 
Where  prior  to  February  25,  1919,  this  period  of  one 
year  and  ninety  days  had  elapsed  without  payment 
of  the  tax,  the  prescribed  interest  liability  attached, 
and  was  reserved  by  the  repealing  act,  either  as  a 
"tax"  or  a  "penalty"  which  had  "accrued"  under 
the  earlier  Act. 

The  Regulations  provide: 

"Where  the  specified  period  had  elapsed 
prior  to  February  25, 1919,  this  penalty  has  been 
incurred,  and  is  not  affected  by  the  passage  of 
the  Revenue  Act  of  1918.  *  *  *  Example: 
The  year  and  90  days,  in  a  given  case,  expired 
on  February  15,  1919,  or  ten  days  before  the 
effective  date  of  the  Revenue  Act  of  1918.  In 
this  case  interest  at  the  rate  of  ten  per  centum 
per  annum  should  be  computed  for  the  period 
of  one  year  and  100  days  from  the  date  of  death, 
or  until  the  Revenue  Act  of  1918  took  effect.  If 
the  tax  is  thereafter  paid  within  the  time  pre- 
scribed by  the  new  act  (which  allows  an  addi- 

7.  Revenue  Act  of  1916,  Sec.  204. 


212  FEDERAL  ESTATE  TAX. 

Default  not  incurred — Revenue  Act  of  1918. 

tional  80  days),  no  further  interest  accrues.  If 
it  is  not  paid  within  that  period,  additional  in- 
terest accrues  at  the  rate  of  six  per  cent  from 
February  25,  1919,  when  the  Revenue  Act  of 
1918  took  effect."     (Art.  120.) 

§  243.  Same — Default  not  incurred. 

The  Regulations  provide: 

"Where,  however,  the  period  of  one  year  and 
90  days  had  not  elapsed  prior  to  February  25, 
1919,  the  Revenue  Act  of  1918  extends  the  time 
of  payment  to  one  year  and  180  days  from  the 
date  of  death.  *  *  *  Example:  On  Febru- 
ary 25,  1919,  in  a  given  case,  only  one  year  and 
80  days  from  the  date  of  the  decedent's  death 
had  elapsed.  No  penalty  having  been  incurred, 
the  estate  has  100  additional  days  in  which  to 
make  payment,  viz,  the  year  and  180  days  pre- 
scribed by  the  Revenue  Act  of  1918.  If,  how- 
ever, the  tax  is  not  paid  within  this  period,  in- 
terest accrues  at  the  rate  of  six  per  cent  from 
the  expiration  of  one  year  from  the  decedent's 
death,  as  provided  by  the  Revenue  Act  of  1918." 
(Art.  120.) 

§  244.  Same — Operative  effect  of  Revenue  Act  of 
1918. 

It  will  be  observed  from  the  foregoing  example 
that,  even  where  a  default  has  occurred  under  the 
Revenue  Act  of  1916,  full  effect  is  given  to  the  pro- 
visions of  the  present  statute  from  the  time  when  it 


PAYMENT  OF  TAX.  213 

Operative  effect  of  Revenue  Act  of  1918. 

became  operative.  That  is,  the  "tax"  or  "penalty" 
preserved  is  only  what  had  accrued  before  the  pres- 
ent statute  went  into  operation.  The  Revenue  Act 
of  1918  does  not  preserve,  in  addition,  a  method 
whereby  such  tax  or  penalty  may  be  increased.8 
This  construction  is  enforced  by  the  following  pro- 
vision of  the  present  statute: 

"That  the  assessment  and  collection  of  all  es- 
tate taxes,  and  the  imposition  and  collection  of 
all  penalties  or  forfeitures,  which  have  accrued 
under  Title  II  of  the  Revenue  Act  of  1916  as 
amended  by  the  Act  entitled  'An  Act  to  provide 
increased  revenue  to  defray  the  expenses  of  the 
increased  appropriations  for  the  Army  and 
Navy  and  the  extensions  of  fortifications,  and 
for  other  purposes,'  approved  March  3,  1917,  or 
Title  IX  of  the  Revenue  Act  of  1917,  shall  be 
according  to  the  provisions  of  Title  IV  of  this 
Act."    (Sec.  1400  [b]).9 

8.  It  is  probably  more  accurate  to  treat  the  case  in  question 
as  one  of  an  accrued  "tax"  rather  than  an  accrued  "penalty." 
If  it  were  the  latter,  there  might  be  justification  for  continuing 
the  interest  provisions  of  the  former  statute,  since  the  present 
statute  saves  not  only  penalties  which  have  accrued,  but  also 
such  as  "may  accrue."  The  latter  words  are  not  used  with 
reference  to  accrued  "taxes." 

9.  The  statute  also  provides:  "In  the  case  of  any  tax 
imposed  by  any  part  of  an  Act  herein  repealed,  if  there  is  a 
tax  imposed  by  this  Act  in  lieu  thereof,  the  provision  imposing 
such  tax  shall  remain  in  force  until  the  corresponding  tax 
under  this  Act  takes  effect  under  the  provisions  of  this  Act." 
(Sec.  1400  [b].) 


CHAPTER  VIII. 
COLLECTION  OF  TAX. 

§  245.  The  statutory  remedy — Not  exclusive. 

The  statute  provides: 

"That  if  the  tax  herein  imposed  is  not  paid 
within  180  days  after  it  is  due,  the  collector 
shall,  unless  there  is  reasonable  cause  for  fur- 
ther delay,  proceed  to  collect  the  tax  under  the 
provisions  of  general  law,  or  commence  appro- 
priate proceedings  in  any  court  of  the  United 
States,  in  the  name  of  the  United  States,  to  sub- 
ject the  property  of  the  decedent  to  be  sold  un- 
der the  judgment  or  decree  of  the  court."  (Sec. 
408.)  " 

The  Regulations  provide: 

"The  Collector  may  commence  in  any  court 
of  the  United  States  appropriate  proceedings, 
in  the  name  of  the  United  States,  to  subject  the 
property  of  the  decedent  to  sale  under  the  judg- 
ment or  decree  of  the  court."  (Art.  116, 
par.  [2]). 

The  statute  gives  an  option  either  to  collect  the 
tax  "under  the  provisions  of  general  law"  or  to  bring 

1.  The  statute  contains  the  further  provision: 
"From  the  proceeds  of  such  sale  the  amount  of  the  tax, 
together  with  the  costs  and  expenses  of  every  description  to  be 
allowed  by  the  court,  shall  be  first  paid,  and  the  balance  shall 
be  deposited  according  to  the  order  of  the  court,  to  be  paid 
under  its  direction  to  the  person  entitled  thereto"  (Sec.  408). 

[214] 


COLLECTION  OF  TAX.  215 

Distraint. 

the  specified  action.  This  is  a  plain  intimation  that 
the  remedy  by  action  is  not  exclusive;  and  such  a 
holding  accords  with  the  rule  that  a  remedy  speci- 
fically prescribed  is  ordinarily  deemed  to  be  cumu- 
lative, rather  than  exclusive.2  The  Regulations  so 
provide,  holding  that — "The  remedy  by  action,  here 
provided  for,  is  not  exclusive."    (Art.  97. )3 

§  246.  Distraint. 

The  Regulations  provide: 

"(1)  Collection  by  distraint.  The  collector 
may  issue  warrant  of  distraint  authorizing  the 
seizure  and  sale  of  any  or  all  of  the  assets  of 
the  estate."     (Art.  116,  par.  [I]).4 

2.  Blacklock  v.  United  States,  208  U.  S.  75.  In  this  ease  the 
provisions  of  the  Act  of  July  20,  1868  (15  Stat.  125,  167)  for 
the  enforcement  of  a  tax  lien  by  suit  in  equity  were  held  not 
to  exclude  the  existing  remedy  by  distraint. 

3.  The  question  whether  the  remedy  by  action  was  exclusive 
under  the  Revenue  Act  of  1916  seems  a  closer  one.  The 
earlier  statute  contained  a  simple  direction  that,  if  payment  of 
the  tax  should  not  be  made  within  sixty  days  after  due,  "the 
collector  shall,  unless  there  is  reasonable  cause  for  further 
delay,  commence  appropriate  proceedings,"  etc.  (Revenue  Act 
of  1916,  Sec.  208.)  The  present  reference  to  the  "provisions 
of  general  law ' '  is  omitted.  The  Bureau  has,  however,  asserted 
throughout  the  right  to  distrain  for  the  estate  tax,  and  has 
actually  used  the  remedy  on  at  least  one  occasion;  and  this 
position  was  supported,  even  under  the  Act  of  1916,  by  the 
rule  that  a  prescribed  remedy  should  be  deemed  to  be  cumula- 
tive. 

4.  For  provisions  as  to  distraint,  see  R.  S.,  Sees.  3187  et  seq. ; 
Comp.  Sts.,  1916,  Sees.  5909  et  seq. 


216  FEDERAL  ESTATE  TAX. 

Personal  liability  of  executor  or  benficiary. 

§  247.  Personal  liability  of  executor  or  beneficiary. 
The  Regulations  provide : 

"(3)  Collection  by  suit  for  personal  liability. 
The  personal  liability  of  the  executor,  of  the 
transferee  or  trustee  of  property  transferred  in 
contemplation  of  death,  and  of  the  beneficiary 
of  taxable  life  insurance  (see  Art.  101)  may  be 
enforced  by  any  appropriate  action."  (Art. 
116,  par.  [3]).5 

5.  As  to  the  personal  liability  of  the  persons  specified,  see 
pp.  222-6. 


CHAPTER  IX. 
POWER  TO  COMPROMISE  OR  REMIT. 

§  248.  Power  to  compromise. 

The  Revised  Statutes  provide: 

"The  Commissioner  of  Internal  Revenue,  with 
the  advice  and  consent  of  the  Secretary  of  the 
Treasury,  may  compromise  any  civil  or  criminal 
case  arising  under  the  internal-revenue  laws  in- 
stead of  commencing  suit  thereon;  and,  with  the 
advice  and  consent  of  the  said  Secretary  and 
the  recommendation  of  the  Attorney-General, 
he  may  compromise  any  such  case  after  a  suit 
thereon  has  been  commenced.  Whenever  a  com- 
promise is  made  in  any  case  there  shall  be  placed 
on  file  in  the  office  of  the  Commissioner  the  opin- 
ion of  the  Solicitor  of  Internal  Revenue,  or  of 
the  officer  acting  as  such,  with  his  reasons  there- 
for, with  a  statement  of  the  amount  of  tax  as- 
sessed, the  amount  of  additional  tax  or  penalty 
imposed  by  law  in  consequence  of  the  neglect 
or  delinquency  of  the  person  against  whom  the 
tax  is  assessed,  and  the  amount  actually  paid  in 
accordance  with  the  terms  of  the  compromise. " 
(R.  S.,  Sec.  3229;  Comp.  Sts.,  1916,  Sec.  5952.) 

The  Regulations  provide: 

"The  Commissioner,  with  the  advice  and  con- 
sent of  the  Secretary  of  the  Treasury,  may  com- 
promise any  civil  or  criminal  case  arising  under 
the  internal-revenue  laws  instead  of  commenc- 

[217] 


218  FEDERAL  ESTATE  TAX. 

Power  to  remit  penalties. 

ing  suit  thereon,  and  with  the  advice  and  con- 
sent of  the  Secretary,  and  upon  the  recommend- 
ation of  the  Attorney  General,  may  compromise 
any  such  case  after  suit  thereon  has  been  com- 
menced by  the  United  States.  Accordingly,  the 
power  to  compromise  extends  to  (a)  both  civil 
and  criminal  cases;  (b)  cases  whether  before  or 
after  suit;  and  (c)  both  taxes  and  penalties." 
(Art.  112.) 

§  249.  No  refund  of  money  received  in  compromise. 
The  Regulations  provide: 

''Refunds  can  not  be  made  of  accepted  offers 
in  compromise  in  cases  where  it  is  subsequently 
ascertained  that  no  violation  of  law  was  in- 
volved."    (Art.  112.) 

§  250.  Limitation  of  power  to  compromise. 

The  Regulations  provide: 

"No  power  exists,  however,  to  compromise  a 
tax  where  its  existence  and  amount  are  not  dis- 
puted in  good  faith,  and  the  taxpayer  is  sol- 
vent."    (Art.  112.) 

§  251.  Power  to  remit  penalties. 
The  Revised  Statutes  provide: 

"Whenever  any  person  who  shall  have  in- 
curred any  fine,  penalty,  or  forfeiture,  or  dis- 
ability *  *  *  shall  prefer  his  petition  to 
the  judge  of  the  district  in  which  such  fine, 
penalty,  or  forfeiture,  or  disability  has  accrued, 
truly  and  particularly  setting  forth  the  circum- 


POWER  TO  COMPROMISE  OR  REMIT.  219 

Power  to  remit  penalties. 

stances  of  his  case,  and  shall  pray  that  the  same 
may  be  mitigated  or  remitted,  the  judge  shall 
inquire,  in  a  summary  manner,  into  the  circum- 
stances of  the  case;  first  causing  reasonable  no- 
tice to  be  given  to  the  person  claiming  such  fine, 
penalty,  or  forfeiture,  and  to  the  attorney  of  the 
United  States  for  such  district,  that  each  may 
have  an  opportunity  of  showing  cause  against 
the  mitigation  or  remission  thereof;  and  shall 
cause  the  facts  appearing  upon  such  inquiry  to 
be  stated  and  annexed  to  the  petition,  and  direct 
their  transmission  to  the  Secretary  of  the  Treas- 
ury. The  Secretary  shall  thereupon  have  power 
to  mitigate  or  remit  such  fine,  forfeiture,  or 
penalty,  or  remove  such  disability,  or  any  part 
thereof,  if,  in  his  opinion,  the  same  was  incurred 
without  willful  negligence,  or  any  intention  of 
fraud  in  the  person  incurring  the  same;  and  to 
direct  the  prosecution,  if  any  has  been  insti- 
tuted for  the  recovery  thereof,  to  cease  and  be 
discontinued,  upon  such  terms  or  conditions  as 
he  may  deem  reasonable  and  just."  (R.  S.,  Sec. 
5292;  Comp.  Sts.,  1916,  Sec.  10,130.) 

4 '  The  Secretary  of  the  Treasury  is  authorized 
to  prescribe  such  rules  and  modes  of  proceed- 
ing to  ascertain  the  facts  upon  which  an  applica- 
tion for  remission  of  a  fine,  penalty,  or  forfei- 
ture is  founded,  as  he  deems  proper,  and,  upon 
ascertaining  them,  to  remit  the  fine,  penalty,  or 
forfeiture,  if  in  his  opinion  it  was  incurred  with- 


220  FEDERAL  ESTATE  TAX. 

Power  to  remit  penalties. 

out  willful  negligence  or  fraud,  in  either  of  the 
following  cases: 

First.  If  the  fine,  penalty,  or  forfeiture  was 
imposed  under  authority  of  any  revenue  law,  and 
the  amount  does  not  exceed  $1,000."  (R.  S., 
Sec.  5293;  Comp.  Sts.,  1916,  Sec.  10,131.) 

The  Regulations  provide : 

''Where  a  fine,  penalty,  or  forfeiture,  not  ex- 
ceeding $1,000,  is  incurred  without  willful  negli- 
gence or  fraud,  it  may  be  remitted  by  the  Secre- 
tary of  the  Treasury;  and  he  may  remit  other 
fines,  penalties,  forfeitures,  and  disabilities 
where  the  court  has  inquired  into  the  matter  and 
made  findings. ' '    (Art.  112.) 


CHAPTER  X. 

'      MISCELLANEOUS. 

§  252.  Effect  given  to  State  law. 

The  statute  imposes  a  tax  "upon  the  transfer  of 
the  net  estate"  of  decedents  (Sec.  401).  It  does  not, 
however,  and  could  not,  attempt  to  determine  of 
what  this  "net  estate' '  consists,  since  that  would  be 
to  regulate  the  devolution  of  estates,  the  power  to  do 
which  resides  wholly  in  the  various  States.1  The 
Bureau  fully  recognizes  this  situation,  and  looks  to 
the  laws  of  the  various  States  to  ascertain  the  char- 
acter of  the  subject  matter  which  may  be  taxed. 
Thus,  such  questions  as  where  the  decedent  was 
domiciled,  and  what  property  is  community  prop- 
erty, are  determined  according  to  the  laws  of  the 
State  having  jurisdiction  of  the  case.  Where  the 
State  decisions  conflict,  the  Bureau  follows  any  de- 
cision which  the  State  has  power  to  put  into  actual 
operation.  Thus,  where  one  State  decides  that  the 
decedent  was  domiciled  therein  at  the  time  of  his 
death  and  proceeds  to  administer  upon  property 
within  the  jurisdiction,  the  Bureau  accepts  this  re- 
sult, although  the  courts  of  another  State  determine 
that  the  decedent  was  domiciled  in  the  latter. 

On  the  other  hand,  the  proper  construction  of  the 
taxing  acts  is  held  to  be  a  federal  question,  the  final 
decision  of  which  rests  with  the  Supreme  Court  of 

1.  See  the  elaborate  discussion  of  this  question  in  Knowllon 
v.  Moore,  178  U.  S.  41,  57-61. 

[221] 


222  FEDERAL  ESTATE  TAX. 

Personal  liability  of  executor. 

the  United  States.  On  this  question  the  decisions 
of  the  State  courts,  while  they  may  be  important  as 
evidence  of  the  true  construction  of  the  various  acts 
of  Congress,  are  not  necessarily  accepted  as  conclu- 
sive. Nor  would  a  rule  adopted  by  the  State  for  use 
in  their  own  proceedings  be  binding  upon  the  Bureau 
in  proceedings  under  the  federal  statutes.  Thus,  a 
State  statute  providing  a  rule  for  the  valuation  of 
annuities,  different  from  that  contained  in  the  Regu- 
lations,2 will  not  be  followed  by  the  Bureau.3 

§  253.  Personal  liability  of  executor. 

The  statute  provides  that  i '  the  executor  shall  pay 
the  tax"  (Sec.  407).  The  Revised  Statutes  contain 
the  following  provision: 

"Every  executor,  administrator,  or  assignee, 
or  other  person,  wiio  pays  any  debt  due  by  the 
person  or  estate  from  whom  or  for  which  he  acts, 
before  he  satisfies  and  pays  the  debts  due  to  the 
United  States  from  such  person  or  estate,  shall 
become  answerable  in  his  own  person  and  estate 
for  the  debts  so  due  to  the  United  States,  or  for 
so  much  thereof  as  may  remain  due  and  un- 
paid." (R.  S.,  Sec.  3467;  Comp.  Sts.,  1916,  Sec 
C373.) 

2.  See,  for  instance,  the  Louisiana  statute  providing  for  the 
use  of  the  American  Experience  Table  of  Mortality  at  6% 
compound  interest.     (Marr's  Ann.  Rev.  Sts.  of  La.,  Sec.  6435.) 

3.  But  see  the  use  made  of  a  State  statute  or  an  existing 
custom  where  it  enters  into  the  question  of  value. 


MISCELLANEOUS.  223 


Authorities — Distribution  of  estate. 


The  Regulations  provide: 

"The  executor  is  personally  liable  for  the 
payment  of  the  estate  tax  to  the  amount  of  the 
full  value  of  the  assets  of  the  estate  which  have 
at  any  time  come  into  his  hands."     (Art.  113.) 

§  254.  Same — Authorities. 

The  statutory  provisions  seem  to  afford  support 
for  the  provisions  of  the  Regulations  just  cited. 
Thus,  it  is  held  that  a  statutory  direction  to  the  exe- 
cutor to  pay  a  tax  renders  him  personally  liable  for 
the  same  insofar  as  he  has  in  his  possession  assets 
sufficient  to  make  the  payment.4 

§  255.  Same — Distribution  of  estate. 

The  further  question  arises  whether  the  executor 
may  divest  himself  of  liability  by  distributing  the 
estate  in  accordance  with  local  law  and  procedure. 
It  would  hardly  be  contended  that  he  might  do  this 
without  any  regard  to  the  tax.  It  is,  however,  urged 
with  some  force  that,  where  he  has  filed  a  return  in 
good  faith  and  paid  what  he  believes  to  be  due,  he 
should  be  permitted  to  distribute  the  estate  in  the 

4.  In  re  Saramon,  3  Mees.  &  W.  381;  Appeal  of  Hopkins,  77 
Conn.  644,  60  Atl.  Rep.  657;  State  v.  Dalrymple,  70  Md.  294, 
17  Atl.  Rep.  82;  In  re  Weed's  Estate,  10  Misc.  (N.  Y.)  628,  32 
N.  Y.  Supp.  777;  Hunter  v.  Husted,  45  N.  C.  141. 

There  is,  of  course,  no  personal  liability  on  the  part  of  the 
executor  aside  from  property  coming  into  his  possession  for 
purposes  of  administration.  See  Matter  of  Meyer,  209  N.  Y. 
386,  103  N.  E.  Rep.  713;  Matter  of  Garcia,  183  App.  Div. 
712,  170  N.  Y.  Supp.  980. 
15 


224  FEDERAL  ESTATE  TAX. 

Distribution  of  estate. 

ordinary  way,  and  that  the  Government  should  be 
required  to  give  notification  of  additional  tax  within 
the  time  prescribed  by  the  local  law  for  the  closing 
of  the  estate.  This  argument,  however,  will  hardly 
stand  analysis.  The  tax  due  is  the  entire  tax,  which 
can  be  determined  only  by  the  investigation  of  the 
return;  and  the  obligation  of  the  executor  extends 
to  this  entire  tax.  Since  the  tax  is  imposed  by  com- 
petent authority,  the  State  cannot  exempt  the  execu- 
tor from  any  part  of  the  liability  imposed.  In  dis- 
tributing the  estate  before  the  final  ascertainment  of 
the  tax,  the  executor  would  be  taking  a  deliberate 
risk  of  depriving  the  Government  of  part  of  its  due.5 
The  Bureau  has  accordingly  ruled  that  the  execu- 
tor is  personally  liable  for  the  payment  of  any  addi- 
tional tax  found  to  be  due  by  the  investigation  of  the 
return,  although,  after  paying  the  amount  shown  to 
be  due  by  the  return,  he  has  distributed  the  estate. 
The  Regulations  provide: 

"If  the  amount  of  tax  as  finally  determined 
exceeds  the  amount  of  tax  already  paid,  the  col- 
lector will  notify  the  executor  of  the  amount  of 
the  unpaid  balance  of  the  tax  and  will  demand 
payment  thereof.     *  *     Where  the  investi- 

gation of  the  return  shows  that  no  further  tax  is 
due,  the  executor  will  be  notified  to  this  effect. 

5.  As  to  the  liability  of  legatees  and  distributers  for  inherit- 
ance taxes  where  the  estate  has  been  distributed,  see  Schouler 
on  Wills,  Executors  and  Administrators,  5th  Ed.,  Sec.  1508b. 


MISCELLANEOUS.  225 


Liability  of  beneficiary. 


Until  the  receipt  of  such  notification,  he  should 
reserve  a  sufficient  portion  of  the  estate  to 
satisfy  any  excess  tax."    (Art.  95.)° 

§  256.  Liability  of  beneficiary. 
The  Regulations  provide: 

''Where    no   executor   or   administrator   has 
been  appointed,  every  person  in  possession  of 
any  part  of  the  gross  estate  is  liable  for  the  tax 
as  an  executor."     (Art.  113.) 
As  has  been  seen,  the  provision  of  the  statute  mak- 
ing a  person  in  possession  of  property  an  "execu- 
tor," where  no  regular  executor  has  been  appointed, 
has  been  applied  so  as  to  require  such  person  to  give 
the  60-day  notice  and  file  the  return.7     There  is  no 
logical  reason  for  stopping  at  this  point.    If  the  per- 
son in  possession  is  an  "executor,"  he  is  liable  to 
all  the  duties  of  an  executor,  one  of  which  is  pay- 
ment of  the  tax  (Sec.  407);  and  the  statutory  pro- 
vision has  been  extended  to  cases  where  there  is  a 
regular  executor  if  the  property  in  question  never 
came  into  his  possession  for  purposes  of  administra- 
tion.8    Consequently  a   person   receiving   the   pro- 

6.  The  importance  of  a  prompt  auditing  of  returns  is,  of 
course,  manifest.  If,  however,  the  executor  might  distribute 
the  estate  immediately  upon  filing  the  return  and  paying  the 
amount  shown  to  be  due,  no  diligence  on  the  part  of  the 
Government  could  prevent  substantial  trouble  and  danger  of 
loss. 

7.  See  pp.  170-2,  184-5. 

8.  See  pp.  172-3,  184-5. 


226  FEDERAL  ESTATE  TAX. 


Lien. 


ceeds  of  a  joint  bank  account  after  the  decedent's 
death  is  held  liable  to  pay  the  tax,  even  though  an 
administrator  has  been  appointed.9 

§  257.  Lien. 

The  statute  provides: 

"That  unless  the  tax  is  sooner  paid  in  full, 
it  shall  be  a  lien  for  ten  years  upon  the  gross  es- 
tate of  the  decedent,  except  that  such  part  of  the 
gross  estate  as  is  used  for  the  payment  of 
charges  against  the  estate  and  expenses  of  its 
administration,  allowed  by  any  court  having 
jurisdiction  thereof,  shall  be  divested  of  such 
lien."    (Sec.  409.) 

The  Regulations  provide: 

"This  lien  attaches  to  every  part  of  the  gross 
estate,  whether  or  not  the  property  comes  into 
the  custody  or  control  of  the  executor.  The  only 
property  divested  of  the  lien  is  such  part  as  is 
used  to  pay  charges  against  the  estate  and  ad- 
ministration expenses  allowed  by  the  court 
which  administers  the  estate.  "With  this  excep- 
tion, the  lien  can  only  be  divested  by  payment. 
It  attaches  to  the  extent  both  of  the  original  tax 
shown  to  be  due  by  the  return  and  of  any  addi- 
tional tax  found  to  be  due  upon  investigation. 
Payment  of  the  entire  tax  is  necessary  in  order 
to  destroy  the  lien."     (Art.  99.) 

9.  The  same  rule  would  doubtless  apply  to  the  transferee  of 
property  where  the  transfer  is  taxable. 


MISCELLANEOUS.  227 


Sale  by  transferee  or  trustee. 


§  258.  Lien  upon  transferred  property  or  insurance. 
The  statute  provides  that  where  the  decedent 
makes  a  transfer  which  is  taxable  under  the  law,  or 
insurance  passes  to  a  specific  beneficiary  under  cir- 
cumstances imposing  a  tax  liability,  and  the  tax  with 
reference  to  such  property  is  not  paid,  "such  prop- 
erty, to  the  extent  of  the  decedent's  interest  therein 
at  the  time  of  such  transfer,  or  to  the  extent  of  such 
beneficiary's  interest  under  such  contract  of  insur- 
ance, shall  be  subject  to  a  like  lien  equal  to  the 
amount  of  such  tax."     (Sec.  409.) 

§  259.  Same — Sale  by  transferee  or  trustee. 

The  statute  provides: 

"Any  part  of  such  property  sold  by  such 
transferee  or  trustee  to  a  bona  fide  purchaser 
for  a  fair  consideration  in  money  or  money's 
worth  shall  be  divested  of  the  lien  and  a  like 
lien  shall  then  attach  to  all  the  property  of  such 
transferee  or  trustee,  except  any  part  sold  to  a 
bona  fide  purchaser  for  a  fair  consideration  for 
money  or  money's  worth."     (Sec.  409.) 

The  Regulations  provide: 

"Where  the  transferee  or  trustee  sells  the 
property  to  a  bona  fide  purchaser  for  a  fair  con- 
sideration in  money  or  money's  worth,  the  lien 
upon  such  property  is  divested ;  but  there  is  sub- 
stituted a  lien  upon  all  of  the  property  of  the 
transferee  or  trustee,  except  such  part  as  may 
be  sold  to  a  bona  fide  purchaser  for  a  valuable 
consideration."    (Art.  101.) 


228  FEDERAL  ESTATE  TAX. 

Release  of  lien — Release  after  discharge  by  payment. 

§  260.  Release  of  lien. 

The  statute  provides: 

"If  the  Commissioner  is  satisfied  that  the  tax 
liability  of  an  estate  has  been  fully  discharged 
or  provided  for,  he  may,  under  regulations  pre- 
scribed b}^  him  with  the  approval  of  the  Secre- 
tary, issue  his  certificate  releasing  any  or  all 
property  of  such  estate  from  the  lien  herein  im- 
posed."    (Sec.  409.) 

The  Regulations  state: 

"The  statute  provides  that,  if  the  Commis- 
sioner is  satisfied  that  the  tax  liability  of  an  es- 
tate has  been  fully  discharged  or  provided  for, 
he  may  issue  his  certificate  releasing  any  or  all 
property  of  the  estate  from  the  lien.  The  issu- 
ance of  certificates  is  a  matter  resting  within 
the  discretion  of  the  Commissioner,  and  certi- 
ficates will  be  issued  only  in  case  there  is  actual 
need  therefor.  In  most  cases  the  receipts  issued 
by  the  collector  constitute  sufficient  acquit- 
tance."    (Art.  100.) 

§  261.  Same — Release  after  discharge  by  payment. 
The  Regulations  provide: 

"The  tax  will  be  considered  fully  discharged 
for  the  purpose  of  the  issuance  of  a  certificate 
only  when  investigation  has  been  completed,  and 
payment  of  the  excess  tax  determined  to  be  due, 
if  any,  has  been  made.  A  certificate  of  release 
of  lien  may  be  issued  by  the  Commissioner  un- 
der these  circumstances  upon  any  or  all  prop- 


MISCELLANEOUS.  229 


Release  before  discharge  by  payment — Examination  of  records. 

city  of  the  estate,  upon  the  filing  by  the  execu- 
tor of  an  application  in  duplicate  on  Form  791. 
The  form  must  contain  all  the  information  called 
for."     (Art.  100.) 

§  262.  Same — Release  before  discharge  by  payment 
— Security  required. 
The  Regulations  provide: 

"Where  the  tax  liability  has  not  been  fully 
discharged,  as  provided  above,  no  general  certi- 
ficate of  release  will  be  granted,  but  releases  of 
lien  upon  particular  items  of  property  will  be 
issued  upon  the  filing  with  the  Commissioner  of 
such  security,  if  any,  as  he  may  require.  Where 
security  is  required,  a  corporate  indemnity  bond 
must  be  furnished,  or  Liberty  Bonds,  or  other 
bonds  of  the  United  States,  must  be  deposited 
with  the  collector.  In  lieu  of  such  security,  the 
Commissioner  may  in  any  case  issue  the  release 
upon  payment  of  the  estimated  tax  upon  the 
transfer  of  the  property  released,  computed  at 
the  highest  rate  applicable  to  the  estate.  If, 
upon  consideration  of  the  application,  the  Com- 
missioner finds  the  issuance  of  the  certificate  to 
be  warranted,  the  collector  will  notify  the  execu- 
tor of  the  amount  of  the  bond,  as  fixed  by  the 
Commissioner."     (Art.  100.) 

§  263.  Examination  of  records. 

The  statute  provides: 

"The  Commissioner,  for  tin'  purpose  of  as- 
certaining the  correctness  of  any  return  or  for 


230  FEDERAL  ESTATE  TAX. 

Taking  of  testimony. 

the  purpose  of  making  a  return  where  none  has 
been  made,  is  hereby  authorized,  by  any  reve- 
nue agent  or  inspector  designated  by  him  for 
that  purpose,  to  examine  any  books,  papers,  rec- 
ords or  memoranda  bearing  upon  the  matters 
required  to  be  included  in  the  return,"  etc. 
(Sec.  1305.) 10 
The  Regulations  provide: 

"It  is  the  duty  of  the  executor  to  keep  such 
records  as  the  Commissioner  may  require.  Exe- 
cutors are  required  to  keep  complete  and  de- 
tailed records  of  the  affairs  of  the  estate,  suffi- 
cient to  enable  the  Bureau  to  determine  accur- 
ately the  amount  of  the  tax  liabilitv."  (Art. 
117.) 

§  264.  Taking  of  testimony. 

The  statute  also  provides  that  the  Commissioner 
"may  require  the  attendance  of  the  person  render- 
ing the  return  or  of  any  officer  or  employee  of  such 
person,  or  the  attendance  of  any  other  person  hav- 
ing knowledge  in  the  premises,  and  may  take  his 
testimony  with  reference  to  the  matter  required  by 
law  to  be  included  in  such  return,  with  power  to  ad- 
minister oaths  to  such  person  or  persons."  (Sec. 
1305.) 

10.  This  provision  and  the  other  provisions  quoted  from 
Sec.  1305  are  not  contained  in  the  Estate  Tax  Law  (Title  IV), 
but  are  applicable  to  estate  tax  proceedings. 


MISCELLANEOUS.  231 


Executor's  duty   to  render  statement. 


The  Regulations  provide: 

' '  In  order  to  ascertain  the  correctness  of  a  re- 
turn, or  to  make  a  return  where  none  has  been 
made,  the  Commissioner  has  power  to  require 
the  attendance,  and  to  take  the  testimony,  of  the 
person  rendering  the  return,  or  any  officer  or  em- 
ployee of  such  person,  or  any  other  person  hav- 
ing knowledge  in  the  premises.  Such  person 
may  be  required  to  produce  any  relevant  book, 
paper  or  other  record.  This  power  may  be  exer- 
cised by  any  revenue  agent  or  inspector  desig- 
nated for  the  purpose."     (Art.  114.) 

§  265.  Executor's  duty  to  render  statement. 

The  statute  provides  that, 

"every  person  liable  to  any  tax  imposed  by  this 
Act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements 
and  returns,  and  shall  comply  with  such  regu- 
lations as  the  Commissioner,  with  the  approval 
of  the  Secretary,  may  from  time  to  time  pre- 
scribe."   (Sec.  1305.) 

The  Regulations  provide: 

"It  is  also  the  duty  of  the  executor  not  only 
to  make  the  formal  return,  but  also  to  render 
any  other  sworn  statement  which  the  Commis- 
sioner may  require  for  the  purpose  of  determin- 
ing whether  a  tax  liability  exists."     (Art.  118.) 


232  FEDERAL  ESTATE  TAX. 

Compelling  testimony. 

§  266.  Compelling  testimony. 
The  statute  provides: 

"That  if  any  person  is  summoned  under  this 
Act  to  appear,  to  testify,  or  to  produce  books, 
papers  or  other  data,  the  district  court  of  the 
United  States  for  the  district  in  which  such  per- 
son resides  shall  have  jurisdiction  by  appro- 
priate process  to  compel  such  attendance,  testi- 
mony, or  production  of  books,  papers,  or  other 
data. 

' '  The  district  courts  of  the  United  States  at  the 
instance  of  the  United  States  are  hereby  invested 
with  such  jurisdiction  to  make  and  issue,  both 
in  actions  at  law  and  suits  in  equity,  writs  and 
orders  of  injunction,  and  of  ne  exeat  republics, 
orders  appointing  receivers,  and  such  other  or- 
ders and  process,  and  to  render  such  judgments 
and  decrees,  granting  in  proper  cases  both  legal 
and  equitable  relief  together,  as  may  be  neces- 
sary or  appropriate  for  the  enforcement  of  the 
provisions  of  this  Act.  The  remedies  hereby 
provided  are  in  addition  to  and  not  exclusive  of 
any  and  all  other  remedies  of  the  United  States 
in  such  courts  or  otherwise  to  enforce  such  pro- 
visions." (Sec.  1318.) 
The  Regulations  provide: 

"Where  any  person  is  summoned  to  appear 
and  testify,  or  to  produce  books,  papers,  or  other 
data,  the  District  Court  of  the  United  States  for 
the  district  in  which  such  person  resides  has 
power  to  compel  the  giving  of  the  testimony,  or 
the  production  of  the  books,  papers,  or  data,  and 
to  issue  any  appropriate  process,  writ,  or  or- 
der."    (Art.  115.) 


MISCELLANEOUS.  233 


Penalties — Failure  to  file  notice  or  return. 

§  267.  Penalties — Failure  to  file  notice  or  return. 

The  statute  provides: 

"That  whoever  fails  to  comply  with  any  duty 
imposed  upon  him  under  section  404  1X 
shall  be  liable  to  a  penalty  of  not  exceeding  $500, 
to  be  recovered,  with  costs  of  suit,  in  a  civil  ac- 
tion in  the  name  of  the  United  States."  (Sec. 
410.) 

The  Revised  Statutes  provide: 

"In  case  of  any  failure  to  make  and  file  a  re- 
turn or  list  within  the  time  prescribed  by  law, 
or  prescribed  by  the  Commissioner  of  Internal 
Revenue  or  the  collector  in  pursuance  of  law, 
the  Commissioner  of  Internal  Revenue  shall  add 
to  the  tax  25  per  centum  of  its  amount,  except 
that  when  a  return  is  filed  after  such  time  and 
it  is  shown  that  the  failure  to  file  it  was  due  to 
a  reasonable  cause  and  not  to  willful  neglect, 
no  such  addition  shall  be  made  to  the  tax."  (R. 
S.,  Sec.  3176;  Comp.  Sts.,  1916,  Sec.  5899.  )12 

The  Regulations  provide: 

"For  failure  to  file  the  60-day  notice  or  the 
return  within  the  time  prescribed,  the  person 
in  default  is  subject  to  a  penalty  not  to  exceed 

11.  Providing  for  the  filing  of  the  60-day  notice  and  the 
return. 

12.  This  section  was  formerly  more  severe,  providing  for  a 
507<  penalty,  which  was  waived  only  "when  a  return  is 
voluntarily  and  without  notice  from  the  collector"  filed  after 
the  default.  (R.  S.,  Sec.  3176,  as  amended  by  Revenue  Act  of 
1916,  Sec.  16.) 


234  FEDERAL  ESTATE  TAX. 

Filing  of  false  or  fraudulent  notice  or  return. 

$500;  and,  for  the  failure  to  file  the  return,  25 
per  cent  may  be  added  to  the  amount  of  the  tax. 
Where  it  appears,  however,  that  the  failure  to 
file  the  return  was  due  to  a  reasonable  cause  and 
not  to  willful  neglect,  no  addition  is  made  to 
the  tax."     (Art.  104.) 

§  268.  Same — Filing  of  false  or  fraudulent  notice  or 
return. 

The  statute  provides: 

"That  whoever  knowingly  makes  any  false 
statement  in  any  notice  or  return  required  to  be 
filed  under  this  title  shall  be  liable  to  a  penalty 
of  not  exceeding  $5,000,  or  imprisonment  not 
exceeding  one  year,  or  both."    (Sec.  410.) 

The  Revised  Statutes  provide: 

"In  case  a  false  or  fraudulent  return  or  list 
is  willfully  made,  the  Commissioner  of  Internal 
Revenue  shall  add  to  the  tax  50  per  centum  of 
its  amount."  (R.  S.,  Sec.  3176;  Comp.  Sts., 
1916,  Sec.  5899.) 13 

The  Regulations  provide: 

"Where  statements  in  the  60-day  notice  or  in 
the  return  are  knowingly  and  willfully  false, 
the  person  making  them  is  subject  to  a  penalty 
of  $5,000,  or  imprisonment  for  one  year,  or 
both ;  and,  for  the  false  return,  50  per  cent  may 

13.  This  penalty  was  formerly  100%.     (R.  S.,  Sec.  3176,  as 
amended  by  Revenue  Act  of  1916,  Sec.  16.) 


MISCELLANEOUS.  235 


Exemption — General  nature  of  penalties. 


be  added  to  the  amount  of  the  tax."     (Art. 
103.)14 

§  269.  Exemption  of  nonresident  estate  with  refer- 
ence to  United  States  bonds. 
Liberty  bonds  and  other  bonds  of  the  United  States 
are  not  included  in  the  gross  estate  of  a  nonresident 
alien.  This  is  due  to  a  special  exemption  provision, 
which,  it  is  ruled,  is  broad  enough  to  embrace  the 
estate  tax.15 

§  270.  General  nature  of  penalties. 
The  Regulations  provide: 

"Two  kinds  of  penalties  are  provided  for  de- 
linquency with  respect  to  the  duties  imposed  by 
the  estate  tax  law : 

(1)  A  specific  penalty,  to  be  recovered  by 
suit,  unless  adjusted  by  an  offer  in  compromise; 
and 

(2)  A  penalty  of  a  certain  percentage  of  the 
tax,  to  be  added  to  the  tax  and  collected  in  the 
same  manner  as  the  tax. 

14.  It  will  be  observed  that  in  both  of  the  cases  just  con- 
sidered the  specific  penalty  applies  to  both  the  60-day  notice 
and  the  return,  while  the  ad  valorem  penalty  applies  to  the 
return  only. 

15.  See  Victory  Liberty  Loan  Act;  Act  of  March  3,  1919, 
Sec.  4  (40  Stat.  1309,  1311) ;  amending  Fourth  Liberty  Bond 
Act;  Act  of  July  9, 1918,  Sec.  3  (40  Stat.  844,  845).  See  rulings 
of  Aug.  6  and  Aug.  21,  1920,  contained  in  War  Tax  Service, 
Corporation  Trust  Company,  1920,  pars.  322-3,  overruling 
previous  ruling  at  par.  173. 


T36  FEDERAL  ESTATE  TAX. 

Failure  to  exhibit  records  or  property. 

In  any  case  of  delinquency  for  which  more 
than  one  penalty  is  provided  the  Government 
may  impose  either  or  both  penalties."  (Art. 
102.) 

§  271.  Same — Failure  to  exhibit  records  or  prop- 
erty. 
The  statute  provides: 

"Whoever  *     having  in  his  possession 

or  control  any  record,  file,  or  paper,  containing 
or  supposed  to  contain  any  information  con- 
cerning the  estate  of  the  decedent,  or,  having  in 
his  possession  or  control  any  property  comprised 
in  the  gross  estate  of  the  decedent,  fails  to  ex- 
hibit the  same  upon  request  to  the  Commissioner 
or  any  collector  or  law  officer  of  the  United 
States,  or  his  duly  authorized  deputy  or  agent, 
who  desires  to  examine  the  same  in  the  perform- 
ance of  his  duties  under  this  title,  shall  be  lia- 
ble to  a  penalty  of  not  exceeding  $500,  to  be  re- 
covered, with  costs  of  suit,  in  a  civil  action  in 
the  name  of  the  United  States."  (Sec.  410.) 
The  Regulations  provide: 

"Where  a  person  in  possession  or  control  of 
any  record,  file,  or  paper,  supposed  to  contain 
information  relating  to  the  estate,  fails  to  ex- 
hibit the  same,  upon  the  request  of  the  Com- 
missioner or  any  collector,  he  is  liable  to  a  pen- 
alty not  to  exceed  $500,  to  be  recovered  by  civil 
action.  He  must  comply  with  such  a  request 
whether  or  not  he  believes  that  the  documents 


MISCELLANEOUS.  237 

Claims  for  abatement  and  refund — In  general. 

contain  information  relating  to  the  estate.  A 
person  in  possession  of  property  forming  pari 
of  the  gross  estate,  and  refusing  to  exhibit  the 
same  upon  the  request  of  the  Commissioner  or 
a  collector,  is  subject  to  a  similar  penalty." 
(Art.  105.) 

§  272.  Claims  for  abatement  and  refund — In  general. 
The  Revised  Statutes  provide: 

' '  The  Commissioner  of  Internal  Revenue,  sub- 
ject to  regulations  prescribed  by  the  Secretary 
of  the  Treasury,  is  authorized  to  remit,  refund, 
and  pay  back  all  taxes  erroneously  or  illegally 
assessed  or  collected,  all  penalties  collected 
without  authority,  and  all  taxes  that  appear  to 
be  unjustly  assessed  or  excessive  in  amount,  or 
in  any  manner  wrongfully  collected;  also  to  re- 
pay to  any  collector  or  deputy  collector  the  full 
amount  of  such  sums  of  money  as  may  be  re- 
covered against  him  in  any  court,  for  any  in- 
ternal revenue  taxes  collected  by  him,  with  the 
cost  and  expenses  of  suit;  also  all  damages  and 
costs  recovered  against  any  assessor,  assistant 
assessor,  collector,  deputy  collector,  agent,  or  in- 
spector, in  any  suit  brought  against  him  by  rea- 
son of  anything  done  in  the  due  performance  of 
his  official  duty,  and  shall  make  report  to  Con- 
gress at  the  beginning  of  each  regular  session 
of  Congress  of  all  transactions  under  this  sec- 
tion.'' (R,  S.,  Sec.  3220;  Comp.  Sts.,  1916,  Sec. 
5944.) 


238  FEDERAL  ESTATE  TAX. 

Claims  for  abatement — Papers  to  be  filed. 

The  Regulations  provide: 

1 '  Under  these  provisions  of  law  two  forms  of 
relief  are  afforded  the  executor  in  cases  where 
he  believes  that  an  excessive  amount  of  tax  has 
been  assessed  against  or  paid  by  him,  either 
upon  the  basis  of  the  return  or  of  the  investiga- 
tion conducted  by  the  Bureau.  The  two  forms 
of  relief  are: 

(1)  Claim  for  abatement  on  Form  47  where 
the  tax  has  been  assessed  but  not  paid. 

(2)  Claim  for  refund  on  Form  46  where  the 
tax  has  been  paid."     (Art.  106.) 

§  273.  Same — Claims  for  abatement — Papers  to  be 
filed. 

The  Regulations  provide: 

''Claims  for  abatement  of  taxes  or  penalties 
illegally  assessed  must  be  made  upon  Form  47, 
and  must  be  sustained  by  the  affidavits  of  the 
parties  against  whom  the  taxes  were  assessed 
or  of  other  parties  cognizant  of  the  facts.  When 
a  tax  has  been  assessed,  the  presumption  is  that 
the  assessment  is  correct;  and  the  burden  of 
showing  that  it  was  improperly  or  illegally  as- 
sessed rests  upon  the  applicant  for  abatement. 
The  affidavit  must  therefore  contain  a  full  and 
explicit  statement  of  all  the  material  facts  re- 
lating to  the  claim  in  support  of  which  they  are 
offered  and  which  are  essential  to  proper  con- 
sideration. Nothing  should  be  left  to  inference, 
but  all  the  facts  relied  upon  should  appear  upon 
the  papers  themselves."     (Art.  107.) 


MISCELLANEOUS.  239 


Limitation  for  filing  claim  to  abate  excess  tax. 

§  274.  Same — Claim  does  not  bar  collection. 
The  Regulations  provide: 

''The  filing  of  a  claim  for  the  abatement  of  a 
tax  alleged  to  have  been  erroneously  assessed 
does  not  necessarily  operate  as  a  suspension  of 
the  collection  of  the  tax.  The  collector  may  col- 
lect the  tax  if  he  thinks  it  necessary,  and  leave 
the  taxpayer  to  his  remedy  of  a  claim  for  re- 
fund.''    (Art.  107.) 

§  275.  Same — Interest. 
The  Regulations  provide: 

"Where  a  claim  for  abatement  is  rejected, 
the  making  of  the  application  does  not  affect  the 
running  of  interest.  The  allowance  of  the  claim, 
however,  in  whole  or  part,  discharges  all  inter- 
est obligations  upon  the  portion  of  the  claim  al- 
lowed. The  same  rules  apply  where,  upon  the 
request  of  the  executor,  a  reinvestigation  is 
made  of  the  amount  of  an  additional  tax." 
(Art.  108.) 

§  276.  Same — Limitation  for  filing  claim  to  abate 
excess  tax. 
The  Regulations  provide: 

"If  it  is  desired  to  file  claim  for  abatement  of 
the  excess  amount  of  tax  disclosed  upon  inves- 
tigation, such  claim  should  be  filed  with  the  col- 
lector within  30  days  of  receipt  of  the  Commis- 
sioner's letter  of  notification.  After  that  period 
the  claim  will  not  be  considered,  but  the  tax 

16 


240  FEDERAL  ESTATE  TAX. 

Claims  for  refund — Papers  to  be  filed. 

must  be  paid,  and  adjustment  made  by  claim  for 
refund."     (Art.  109.) 

§  277.  Claims  for  refund !  "—Papers  to  be  filed. 

The  Eegulations  provide: 

"Claims  for  refund  of  assessed  taxes  and 
penalties  must  be  made  on  Form  46.  In  this 
case,  as  in  the  case  of  claims  for  abatement,  the 
burden  of  proof  rests  upon  the  claimant.  All 
the  facts  relied  upon  in  support  of  the  claim 
should  be  clearly  set  forth  under  oath.  With 
the  claim  should  be  presented,  in  addition  to 
the  evidence: 

(1)  Collector's  receipt  evidencing  payment  of 
tax. 

(2)  Where  the  claim  is  made  by  the  executor 
or  administrator,  a  certified  copy  of  the  letters 
testamentary  or  of  administration,  and  a  certi- 
ficate that  the  appointment  remains  in  full  force 
and  effect. 

(3)  Where  the  executor  or  administrator  has 
been  discharged,  a  certified  copy  of  the  decree 
discharging  him,  and  evidence  as  to  the  persons 
entitled  to  receive  the  refund,  setting  forth  their 
names.  Where  the  claim  is  made  on  behalf  of  a 
number  of  persons,  there  should  be  furnished  a 
power  of  attorney  duly  executed  by  all  the  bene- 

16.  For  special  provisions  for  refund  where  there  has  been 
no  allowance  of  the  deduction  of  charitable  and  similar  be- 
quests, see  supra,  p.  152. 


MISCELLANEOUS.  241 


Time  to  file — Payment  in  installments. 


ficiaries  showing  the  claimant's  authority  to  act 
in  their  behalf."    (Art.  110.) 

§  278.  Same— Time  to  file. 

The  Revised  Statutes  provide  that  claims  for  the 
refunding  of  money  illegally  collected  by  the  Bureau 
"must  be  presented  to  the  Commissioner  of  Internal 
Revenue  within  two  years  next  after  the  cause  of  ac- 
tion accrued."17 

§  279.  Same — Payment  in  installments. 

Where  the  tax  is  paid  in  installments,  and  part  of 
the  money  is  due,  a  question  arises  as  to  the  date 
when  the  two-year  limitation  period  begins  to  run. 
It  is  held,  under  such  circumstances,  that  the  cause 
of  action  does  not  accrue  until  the  executor  has  liqui- 
dated the  amount  of  tax  which  is  due,  and  paid  a 
sum  which  is  not  due.  Thus,  where  the  executor 
pays  the  tax  shown  to  be  due  by  the  return,  all  of 

17.  R.  S.,  Sec.  3228;  Comp.  Sts.,  1916,  Sec.  5951.  The  cause 
of  action  accrues  at  the  time  the  illegal  payment  is  made.  (Pub- 
lic Service  Railway  Co.  v.  Herold,  219  Fed.  Rep.  301,  309.) 
The  Revised  Statutes  also  provide  that  suit  upon  the  claim  must 
be  brought  "within  two  years  next  after  the  cause  of  action 
accrued."  (Sec.  3227;  Comp.  Sts.,  1916,  Sec.  5950).  The  refer- 
ence here  is  to  the  time  when  the  Commissioner  rejects  the 
claim  or,  at  the  option  of  the  taxpayer,  the  expiration  of  the  six 
months  period  within  which  (see  Sec.  3226)  it  is  contemplated 
that  the  Commissioner  will  make  his  decision.  Merck  v.  Trent. 
174  Rep.  388;  State  Line  &  Sullivan  R.  R.  Co.  v.  Davis,  22S  Fed. 
Rep.  246.  But  compare  Schwarzchild  &  Sulzberger  Co.  v. 
Rucker,  143  Fed.  Rep.  656. 


242  FEDERAL  ESTATE  TAX. 

Undervaluation  of  property — Payment  of  claims. 

which  is  due,  and  is  then  directed  to  pay,  and  pays, 
an  excessive  amount  of  additional  tax,  the  period  of 
limitation  begins  to  run  at  the  date  of  the  second 
payment;  and  a  claim  filed  within  two  years  of  that 
date  is  in  time.18 

§  280.  Undervaluation  of  property. 

It  has  been  ruled  that  a  deliberate  undervaluation 
of  property  in  the  return,  made  by  the  executor  in 
bad  faith,  is  a  violation  of  the  statutory  provision, 
and  subjects  him  to  the  penalty  for  making  a  false 
return. 

§  281.  Payment  of  claims. 

The  Regulations  provide: 

"Warrants  in  payment  of  claims  allowed  will 
be  drawn  in  the  names  of  the  parties  entitled  to 
the  money,  and  will,  unless  otherwise  directed, 
be  sent  by  the  Treasurer  of  the  United  States 
directly  to  the  proper  parties,  or  their  duly  au- 
thorized attorneys  or  agents;  but  if  the  claim- 
ants are  indebted  to  the  United  States  for  taxes 
such  taxes  must  be  paid  before  the  warrants  are 
delivered."     (Art.  111.) 

18.  The  presumption  is  thus  indulged,  as  long  as  possible, 
that  the  executor  is  paying  what  is  actually  due. 

If  the  claim  is  not  filed  within  the  time  specified  in  the 
statute,  it  is  ruled  that  the  Commissioner  has  no  authority  to 
receive  it,  even  though  there  are  circumstances  of  hardship 
attending  the  illegal  exaction.  This  accords  with  the  general 
rule  that  Government  agents  have  no  authority  to  waive  the 
bar  of  the  Statute  of  Limitations.  Finn  v.  United  States,  123 
U.  S.  227;  United  States  v.  Utz,  80  Fed.  Rep.  848. 


ADDENDA 


ADDENDA 
I. 

COMPARATIVE  TABLE  OF  STATUTES  CONTAINING 

PRESENT  ESTATE  TAX  LAW. 

Revenue  Act  of  1918       U.  9. Compiled   St;it  Carries' Federal  Code, 

(40  Stat.,  Chap.   18,       utes,  Annotated,  1910.  \'.)>]    Supplement, 
pp.   1096-1101)             Supplement  1919,  Vol.  I. 

Sec.  400         Sec.  633634a  Sec.  5884 

Sec.  401         Sec.  63363,4b  Sec.  5885 

Sec.  402          Sec.  633634c  Sec.  5886 

Sec.  403         See.  63363^d  Sec.  5887 

Sec.  404          Sec.  633634e  Sec.  5888 

Sec.  405         Sec.  6336%f  Sec.  5889 

Sec.  406         Sec.  63363^  Sec.  5890 

Sec.  407         Sec.  633634b  Sec.  5891 

Sec.  408          Sec.  633634i  Sec.  5892 

Sec.  409          Sec.  63363^  Sec.  5893 

Sec.  410         Sec.  633634k  Sec.  5894 
[243] 


II. 

TREASURY  DECISIONS  RELATING  TO  THE 
ESTATE  TAX. 


(T.  D.  2372) 
Estate  Tax. 

Beneficiaries  coming  into  possession  of  any  property  of  a  de- 
eedent  where  no  executor  or  administrator  of  the  decedent 's  prop- 
erty is  acting,  and  beneficiaries  coming  into  possession  of  any 
property  of  a  decedent  prior  to  the  appointment  of  executors  or  ad- 
ministrators, are  required,  where  the  estate  would  be  subject  to  tax- 
ation, to  file  the  30-day  notice  and  the  return  provided  by  section 
205,  Title  II,  of  the  revenue  act  of  September  8,  1916. 

Treasury  Department, 

Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  September  25,  1916. 
To  collectors  of  internal  revenue: 

The  subjoined  extract  from  an  opinion  of  the  Soli- 
citor of  Internal  Revenue,  dated  September  23,  1916, 
is  published  for  the  information  of  those  concerned. 

The  said  law,  the  revenue  act  of  September  8, 
1916,  section  200,  defines  the  term  "executor"  as 
meaning  "the  executor  or  administrator  of  the  de- 
cedent, or,  if  there  is  no  executor  or  administrator, 
any  person  who  takes  possession  of  any  property  of 
the  decedent." 

Section  205  requires  "that  the  executor,  within  30 
days  after  qualifying  as  such,  or  after  coming  into 
possession  of  any  property  of  the  decedent,  which- 
ever event  first  occurs,  shall  give  written  notice 
thereof  to  the  collector;"  and  that  "the  executor 

[244] 


TREASURY  DECISIONS.  245 


T.   D.    2372. 


shall  also,  at  such  times  and  in  such  manner  as  may 
be  required  by  the  regulations  made  under  this  title, 
file  with  the  collector  a  return  under  oath  in  dupli- 
cate, setting  forth  the  value  of  the  gross  estate,"  etc. 

Manifestly,  the  purpose  of  the  law  is  to  secure 
such  information  and  returns  as  will  enable  the  Gov- 
ernment to  properly  execute  the  law  and  collect  such 
taxes  as  may  be  thereby  imposed. 

In  view  of  this  uniform  interpretation  as  to  the 
requirement  of  notice  and  returns  in  all  matters  of 
revenue  taxation,  as  well  as  the  specific  language  of 
the  law,  I  am  of  the  opinion  that  you  are  justified 
in  the  preparation  of  regulations  requiring  persons 
who  come  into  possession  of  the  property  of  a  de- 
cedent, or  any  part  thereof,  prior  to  the  appointment 
of  executors  or  administrators,  to  give  due  and 
proper  notice  to  the  collector  of  that  fact.  When 
executors  or  administrators  are  appointed  they,  of 
course,  supersede  all  other  persons  in  the  control  of 
the  property  whether  such  persons  are  in  possession 
or  not,  and  the  duty  of  giving  notice  and  making  re- 
turns for  the  entire  estate  immediately  devolves 
upon  such  executors  or  administrators. 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

Wm.  P.  Malburn, 

Acting  Secretary  of  the  Treasury. 


246  FEDERAL  ESTATE  TAX. 

T.  D.  2378,  2385. 

(T.  D.  2378) 

This  Treasury  Decision  contained  the  original 
Estate  Tax  Regulations.  They  were  promulgated  on 
October  10,  1916,  and  revised  in  May,  1917,  and 
again  in  August,  1919,  and  January,  1921.  The  last 
revision  constitutes  the  present  estate  tax  regula- 
tions. 

The  original  regulations  are  not  now  of  enough 
value  to  warrant  inclusion. 


(T.  D.  2385) 

Estate  Tax — Taxable  Transfers. 

Transfers  of  property  made  prior  to  September  8,  1916,  or  by 
instrument  dated  prior  thereto,  but  made  in  contemplation  of 
death,  are  taxable  where  the  transferor  died  after  September  8, 
191C,  leaving  a  total  estate  exceeding  the  specific  exemption,  if 
any. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  October  21,  1916. 

Mr.  

Sir :  Replying  to  the  inquiry  in  your  letter  of  the 
10th  instant,  you  are  informed  that  paragraph  B 
of  section  202,  Title  II,  of  the  act  of  September  8, 
1916,  provides  for  the  inclusion  in  the  gross  estate 
of  a  decedent  dying  on  or  after  September  9,  1916, 
of  any  interest  of  which  the  decedent  "has,  at  any 
time,  made  a  transfer"  in  contemplation  of,  or  in- 
tended to  take  effect  at  or  after,  decedent's  death. 

This  language  is  so  specific  that  it  hardly  would 
seem  open  to  question  that  Congress  intended  to 


TREASURY  DECISIONS.  247 

T.  D.  2395. 

include  in  the  gross  estate  not  only  such  transfers, 
including  gifts  and  sales  not  bona  fide  made  by  in- 
strument dated  after  September  8,  1916,  or  where 
the  actual  transfer  took  place  after  that  date,  but 
transfers  of  any  kind  made  in  contemplation  of 
death  at  any  time  whatsoever  prior  to  September 
8,  1916.  It  is  believed  also  that  there  is  no  ques- 
tion of  the  power  of  Congress  to  enact  such  revenue 
legislation.  The  test  of  the  tax  liability  is  not  in 
such  cases  the  date  of  the  instrument  making  the 
transfer  or  the  date  of  the  actual  transfer,  but  the 
date  of  the  death  of  the  decedent. 

Respectfully, 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

Wm.  P.  Malburn, 

Acting  Secretary  of  the  Treasury. 


(T.  D.  2395) 
Inheritance  Taxes. 

State  inheritance  taxes  deductible  from  the  gross  estate  in  de- 
termining tax  due  under  Title  II  of  the  act  of  September  8,  1916. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  November  17.  1916. 
Collector  Internal  Revenue, 
Pittsburgh,  Pa. 
Sir:     Replying  to  your  letter  of  the  14th  instant 
inquiring    whether    State    inheritance    taxes    are 


248  FEDERAL  ESTATE  TAX. 

T.  D.  2395. 

deductible  from  the  gross  estate  of  a  decedent  in 
determining  the  Federal  tax  due  under  Title  II  of 
the  revenue  act  of  September  8,  1916,  you  are  in- 
formed that  among  the  deductions  from  the  gross 
estate  specified  in  section  203,  paragraph  a,  sub- 
paragraph 1,  of  the  above-mentioned  act  is  the 
item  "such  other  charges  against  the  estate  as  are 
allowed  by  the  laws  of  the  jurisdiction,  whether 
within  or  without  the  United  States,  under  which 
the  estate  is  being  administered." 

Since  it  does  not  appear  open  to  question  that 
State  inheritance  taxes  are  a  primary  charge 
against  an  estate  and  allowable  as  credits  to  execu- 
tors and  administrators  in  every  State  imposing 
such  taxes,  they  are  clearly  deductible  from  the 
gross  estate  of  the  decedent  whose  property  and 
interests  are  liable  to  the  Federal  tax  imposed  in 
Title  II  of  the  act  of  September  8,  1916. 

Respectfully, 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

Byron  R.  Newton, 

Acting  Secretary  of  the  Treasury. 

(Note:  This  Treasury  Decision  was  revoked  by 
Treasury  Decision  2524.) 


TREASURY  DECISIONS.  249 

T.  D.  2406. 

(T.   D.   2406) 
Estate  Tax. 

Income  earned  after  decedent's  death  and  appreciation  in  values 
during  administration  are  not  to  be  returned  as  a  portion  of  the 
gross  estate. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  December  2,  1916. 

Mr.  

Sir:  Replying  further  to  your  letter  of  October 
26,  1916,  you  are  informed  that  Article  VII  of  regu- 
lations 37  has  been  reconsidered,  and  in  view  of  an 
opinion  of  the  Solicitor  of  Internal  Revenue,  dated 
November  9,  sustained  in  an  opinion  of  the  Attorney 
General  of  November  29,  it  is  held  that,  for  the  pur- 
pose of  tax  under  Title  II  of  the  revenue  act  of 
September  8,  1916,  the  gross  estate  of  a  decedent 
must  be  based  upon  the  value  of  the  property  at  the 
time  of  decedent's  death,  and  income  earned  after 
death  and  appreciation  in  values  during  administra- 
tion shall  not  be  returned  for  estate  tax. 

Respectfully, 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

Wm.  P.  Malburn, 

Acting  Secretary  of  the  Treasury. 


250  FEDERAL  ESTATE  TAX. 

T.  D.  2415. 

(T.  D.  2415) 
Estate  Tax. 

Conditions  under  which  tentative  return  may  be   filed  and  ad- 
vance tax  payment  accepted. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  December  14,  1916. 
Sir:     Receipt  is  acknowledged  of  your  report  of 
the  7th  instant  with  regard  to  the  liability  to  estate 

tax  of  the  estate  of .    You  make  specific 

inquiry  with  regard  to  the  allowance  of  certain 
estimated  deductions  from  the  gross  estate  which 
were  shown  by  the  executor  upon  his  preliminary 
return. 

Section  204  of  the  taxing  act,  in  which  provision 
is  made  for  the  allowance  of  a  discount  of  5  per 
cent  for  payment  of  tax  before  the  expiration  of  one 
year  from  the  death  of  the  decedent,  does  not,  of 
course,  contemplate  that,  in  order  to  take  advantage 
of  this  discount,  executors  shall  be  permitted  to 
make  vague  and  inaccurate  estimates  of  the  value 
of  the  gross  estate,  or  the  extent  of  the  legal  deduc- 
tions therefrom.  If  executors  were  permitted  to 
make  returns  which  were  mere  estimates  it  is 
obvious  that  they  might  oftentimes  estimate  the 
gross  estate  conservatively  and  estimate  the  deduc- 
tions generously,  or,  at  least,  it  could  not  be 
assumed  that  this  had  not  been  done,  and  it  would, 
therefore,  be  necessary  that  in  every  case,  after  the 
final  accounting  of  the  executors,  the  Government 


TREASURY  DECISIONS.  251 

T.  D.  2415. 

should  make  a  supplementary  investigation  to  de- 
termine the  true  facts,  since  in  the  majority  of  the 
cases  it  would  be  probable  that  the  tax  had  been 
underpaid  in  the  first  instance. 

Section  205  provides  for  the  filing  of  the  return 
at  such  times  and  in  such  manner  as  may  be  required 
under  the  regulations  promulgated  by  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  and  it  is  obvious 
that  the  proper  time  for  return  to  be  made  is  a  time 
coincident,  as  nearly  as  possible,  with  the  final 
settlement  of  the  estate  and  the  date  upon  which 
the  estate  tax  is  due.  Since  in  many  States  more 
than  a  year  from  the  decedent's  death  is  allowed  for 
administration,  the  time  set  by  the  regulations  for 
the  filing  of  the  return  was  made  coincident  with 
the  due  date  of  the  tax — that  is,  one  year  after 
decedent's  death. 

Section  207  of  the  act  relates  primarily  to  the 
payment  of  the  tax  and  not  to  the  filing  of  the 
return,  and  it  contemplates  that,  if  at  the  time  the 
tax  is  due  it  is  impossible,  because  of  delay  in 
administration,  for  an  exactly  accurate  return  to  be 
made,  a  tentative  return  may  be  filed  and  tax  shown 
thereon  to  be  due  may  be  tentatively  accepted  by  the 
collector.  Neither  section  205  nor  section  207  con- 
templates that  at  any  time  return  may  be  filed  and 
lax  paid  without  a  reasonably  approximate  deter- 
mination of  the  facts  relating  to  the  gross  estate 
and  the  separate  legal  deductions. 

Therefore,  when  application  is  made  to  collectors 


252  FEDERAL  ESTATE  TAX. 

T.  D.  2421. 

for  authority  to  file  returns  within  one  year  from 
the  death  of  the  decedent  whose  estate  is  being  re- 
turned, collectors  will  require  that  such  tentative 
return  be  based  upon  determined  or  accurately 
determinable  values  of  gross  estate  and  items  of 
deductions,  and  if  the  estate  in  question  has  not 
reached  such  a  state  of  settlement  that  a  reason- 
ably accurate  return  can  be  made,  advance  payment 
of  tax  will  not  be  accepted. 

Respectfully, 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Internal  Revenue  Agent,  Richmond,  Va. 


(T.  D.  2421) 
Estate  Tax. 

Thirty-day  notice,  return,  and  tax  payment  required  of  repre- 
sentatives in  this  country  of  nonresidents  where  no  executor  acts 
within  the  required  time;  also  a  similar  requirement  in  the  case 
of  fiduciaries  holding  property  of  a  resident  where  no  executor 
acts. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  December  22,  1916. 
To    collectors    of    internal    revenue    and    revenue 
agents: 
Inquiry  has  been  made  of  this  office  as  to  the 
liability  under  section  205  of  the  revenue  act  of 
September    8,    1916,    of    representatives    in    this 
country  of  a  nonresident  decedent  leaving  property 
in  the  hands  of  the  representatives,  and  where,  so 


TREASURY  DECISIONS.  253 

T.  D.  2421. 

far  as  the  representatives  know,  no  executor  has 
been  appointed. 

Section  205  of  the  act  requires  that  the  "execu- 
tor" within  30  days  after  qualifying  as  such,  or 
after  taking  possession  of  any  property  of  dece- 
dent, whichever  event  first  occurs,  shall  give  notice 
to  the  proper  collector,  and  that  later  the  "execu- 
tor" shall  file  return  of  the  estate.  Section  207 
requires  that  the  "executor"  shall  pay  the  tax  to 
the  proper  collector  or  his  deputy.  In  section  200 
the  term  "executor"  as  used  throughout  Title  II  is 
denned  as  meaning  either  the  executor  or  admin- 
istrator, or  if  there  is  none,  "any  person  who  takes 
possession  of  any  property  of  the  decedent." 

In  the  instance  cited  to  this  office  for  ruling,  it  is 
argued  that  the  representatives  in  this  country  of 
the  nonresident  decedent  do  not  "take  possession" 
of  decedent's  property,  and  that,  since  the  repre- 
sentatives are  neither  administrators  nor  benefi- 
ciaries, they  can  not  be  required  to  file  the  30-day 
notice,  or  return,  or  make  payment  of  the  tax. 

From  this  view  the  Government  must  dissent,  for 
although  there  is  no  change  of  agent  or  representa- 
tive, there  is,  immediately  upon  the  nonresident's 
death,  a  complete  change  in  the  character  of  the 
agency.  Prior  to  the  death,  the  local  representatives 
held  the  property  in  charge  for  the  nonresident,  but 
immediately  the  death  has  occurred  they  hold  sub- 
ject to  the  order  of  executors  or  administrators,  and 
for  the  beneficiaries  legally  entitled  thereto.  At  the 
moment  of  death  there  is,  on  the  part  of  the  local 

17 


254  FEDERAL  ESTATE  TAX. 

T.  D.  2421. 

representatives,  an  actual  legal  taking  of  possession 
for  succeeding  owners — a  change  in  the  conditions 
of  possession  so  complete  that  no  actuality  would 
be  added  by  the  substitution  of  other  agents.  It  is 
clear,  therefore,  that,  under  the  provisions  of  Title 
II,  such  representatives  are  responsible  for  the 
filing  of  the  30-day  notice  and  can  be  saved  from 
this  responsibility  only  if,  prior  to  the  expiration  of 
30  days  from  the  death  of  the  nonresident,  the  re- 
quired notice  has  been  filed  by  the  executor  or  ad- 
ministrator. 

Further  weight  is  given  to  this  ruling  by  a  con- 
sideration of  the  very  evident  intent  of  Congress  in 
its  definition  in  section  200  of  the  term  "  executor. ' ' 
This  definition  was  given  with  the  sole  purpose  of 
providing  effective  means  for  the  ascertainment 
and  collection  of  the  tax  due  in  every  case  where  the 
complete  facts  might  not  be  known  to  the  executor 
or  where  the  executor  might  be  in  a  position  suc- 
cessfully to  evade  his  responsibilities  under  the  tax- 
ing act.  Obviously,  the  object  on  the  part  of  Con- 
gress in  causing  "any  person  who  takes  possession 
of  any  property  of  the  decedent"  to  share  equally 
with  executors  and  administrators  the  liability  to 
render  notice  and  return  and  pay  the  tax  was  that 
there  should  not  be,  under  any  circumstances  of 
transmission,  a  failure  of  the  administrative  power 
to  secure  a  full  disclosure  of  the  facts  and  a  com- 
plete satisfaction  of  the  tax.  Congress  must  have 
foreseen,  in  enacting  the  final  paragraph  of  section 
202,  that  without  such  an  administrative  require- 


TREASURY  DECISIONS.  255 

T.  D.  2421. 

inent  as  this  the  tax  due  because  of  stock  owned  by 
a  nonresident  in  domestic  corporations  could  be  suc- 
cessfully evaded.  The  definition  of  "executor"  in 
section  200  was  made  intentionally  so  broad  that  no 
property  subject  to  the  tax  could  escape  taxation 
through  any  uncertainty  as  to  the  person  liable  for 
giving  accurate  information  with  regard  thereto. 

The  30-day  notice  will  therefore  be  required  in 
every  case  of  such  representatives  in  the  United 
States  of  nonresident  decedents,  unless  the  repre- 
sentatives know  that  within  30  days  after  the  death 
of  the  decedent  the  executor  or  administrator  has 
filed  the  notice.  Similarly,  the  return  for  the  por- 
tion of  the  estate  within  their  charge  will  be  re- 
quired of  the  local  representatives  within  one  year 
from  the  death  of  the  decedent,  unless  the  local 
representatives,  prior  to  that  time,  have  ascertained 
that  the  executor  or  administrator  has  filed  the  re- 
turn. Similarly,  tax  payment  will  be  required  of 
the  representatives  out  of  the  property  in  their 
charge  if  payment  has  not  been  made  before  the  due 
date  by  the  executor  or  administrator.  The  penalty 
imposed  in  section  210  for  failure  to  fulfill  these 
requirements  is  $500,  to  be  recovered  with  costs  of 
suit  in  a  civil  action. 

This  ruling  applies  also  with  regard  to  certain 
property  of  residents,  such  as  the  decedent's  interest 
in  joint  bank  accounts  or  any  other  property  owned 
jointly,  or  as  tenants  in  entirety,  and  property  con- 
veyed by  deed  of  trust.    In  such  cases  the  fiduciary 


256  FEDERAL  ESTATE  TAX. 

T.  D.  2449. 

holding  for  the  succeeding  beneficiary  the  dece- 
dent's share  of  the  joint  account,  or  other  property 
jointly  owned,  or  acting  as  trustee  of  property  con- 
veyed to  beneficiaries  by  a  deed  of  trust,  is  required 
to  file  the  30-day  notice  and  the  return  and  make 
tax  payment,  unless,  within  the  required  periods, 
the  requirements  of  the  law  have  been  otherwise 
fully  satisfied. 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


(T.  D.  2449) 
Estate  Tax. 

The  value  of  United  States  bonds  can  not  be  excluded  from  the 
gross  or  net  estate  in  determining  estate  tax  due. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  February  13,  1917. 
The  following  opinion  of  the  Solicitor  of  Internal 
Revenue,  rendered  February  13,  1917,  is  published 
for  the  information  of  all  concerned. 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


TREASURY  DECISIONS.  267 


T.  D.  2449. 


Sir :    Answering  the  question  presented  by 

under  date  of  the  10th  instant,  relative  to  the  lia- 
bility of  estates  to  taxation  under  the  recent  Federal 
estate  tax,  it  is  manifest  from  the  following  deci- 
sions of  the  United  States  Supreme  Court  that 
United  States  Government  bonds  must  be  added  to 
the  value  of  estates  for  the  purpose  of  taxation 
under  said  act. 

The  United  States  Supreme  Court  in  Plummer  v. 
Coler  (178  U.  S.  134),  considering  the  question 
whether,  under  the  inheritance-tax  laws  of  a  State, 
a  tax  might  be  validly  imposed  upon  a  legacy  con- 
sisting of  United  States  bonds  issued  under  a  statute 
declaring  them  exempt  from  State  taxation  in  any 
form,  said: 

"We  think  the  conclusion,  fairly  to  be  drawn  from 
the  State  and  Federal  cases,  is,  that  the  right  to 
take  property  by  wyill  or  descent  is  derived  from 
and  regulated  by  municipal  law;  that,  in  assessing  a 
tax  upon  such  right  or  privilege,  the  State  may  law- 
fully measure  or  fix  the  amount  of  the  tax  by  refer- 
ring to  the  value  of  the  property  passing;  and  that 
the  incidental  fact  that  such  property  is  composed 
wholly  or  in  part  of  Federal  securities  does  not 
invalidate  the  tax  or  the  law  under  which  it  is  im- 
posed. 

And  dealing  directly  with  the  power  of  the 
Federal  Government  under  the  inheritance-tax  act 
of  1898  to  impose  legacy  taxes  upon  the  transmis- 
sion of  an  estate  consisting  of  " free-tax"  Govern- 


258  FEDERAL  ESTATE  TAX. 

T.  D.  2449. 

ment  bonds,  the  court,  in  Murdock  v.  Ward  (178 
U.  S.  147),  referring  to  the  discussion  and  decision 
in  the  Plummer  case,  held: 

If  a  State  inheritance  law  can  validly  impose  a 
tax  measured  by  the  amount  or  value  of  the  legacy, 
even  if  that  amount  includes  United  States  bonds, 
the  reasoning  that  justifies  such  a  conclusion  must, 
when  applied  to  the  case  of  a  Federal  inheritance 
law  taxing  the  very  same  legacy,  bring  us  to  the 
same  conclusion.  We  must,  therefore,  hold  that  if, 
as  held  in  Knowlton  v.  Moore,  the  tax  imposed 
under  the  act  of  June  13,  1898,  is  not  invalid  as  a 
direct,  unapportioned  tax,  nor  for  want  of  uni- 
formity, nor  as  an  infringement  upon  the  laws  of 
the  States  regulating  wills  and  descents,  then  the 
tax  upon  legacies  or  bequests,  descendible  under  and 
regulated  by  State  laws,  is  valid,  even  if  such 
legacies  incidentally  are  composed  of  Federal  bonds. 

And,  further,  in  Sherman  v.  United  States  (178 
U.  S.  151),  the  court  said: 

The  proposition  that  bonds  of  the  United  States 
and  the  income  therefrom  are  not  lawfully  taxable 
under  an  inheritance  tax  law  of  the  United  States, 
because  exempted  by  contract  from  such  tax,  has 
just  been  decided  not  to  be  well  founded. 

This  is  clearly  conclusive  of  the  whole  question. 


TREASURY  DECISIONS.  259 

T.  D.  2450. 

(T.  D.  2450) 
Estate  Tax. 

Method  of  determining  share  in  community  property  or  property 
owned  jointly  or  in  entirety.  To  bo  returned  as  a  portion  of  the 
gross  estate  of  a  decedent  tenant. 

Treasury  Department, 

Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C.,  February  14,  1917. 

Sir:     Receipt  is  acknowledged  of  your  letter  of 

the  6th  instant,  calling  attention  to  the  report  of 

the  revenue  agent,  dated  the  3d  instant,  with  regard 

to  the  liability  to  estate  tax  of  the  estate  of . 

You  state  that,  under  the  Texas  law,  all  prop- 
erty earned  by  a  husband  or  wife  during  the  period 
of  their  marriage  is  community  property  and  owned 
jointly.  The  death  of  either  does  not  affect  the 
interest  owned  by  the  survivor ;  that  is,  this  interest 
does  not  pass  by  inheritance.  The  public  records  in 
such  cases  may,  however,  be  misleading  because  any 
conveyance,  legally  made  to  both,  is  apt  to  be  re- 
corded in  the  name  of  one,  usually  the  husband.  As 
a  matter  of  fact,  however,  there  is  a  legal  pre- 
sumption that  the  whole  property  conveyed  to  either 
is  community,  without  reference  to  the  manner  of 
its  acquisition.  However,  if  property  were  pur- 
chased by  the  separate  means  or  property  of  either, 
or  were  received  by  either  as  an  inheritance,  such 
property  would  not  be  community  but  would  be  in- 
dividual property,  without  reference  to  the  manner 
in  which  the  deed  of  conveyance  is  stated.     Not- 


260  FEDERAL  ESTATE  TAX. 

T.  D.  2450. 

withstanding  this,  however,  under  the  presumption 
of  the  Texas  law,  it  would  have  to  be  considered 
community  property  until  facts  otherwise  were 
developed. 

In  the  case  of  the estate  the  revenue 

agent  reported  as  belonging  to  the  estate  of  the  de- 
ceased husband  the  entire  property,  which  the  public 
records  showed  as  in  his  name.  The  widow,  who  is 
also  administratrix,  stated  to  the  agent  that  the 
entire  property  so  treated  by  the  agent  as  the  gross 
estate  of  the  deceased  husband  was,  in  fact,  com- 
munity property,  but  up  to  this  time  she  has  sub- 
mitted no  evidence  substantiating  this  contention. 
While  for  the  purposes  of  local  administration  a 
presumption  would  be  created  by  the  local  law  in 
favor  of  the  widow's  contention  in  this  case,  such 
a  presumption  does  not  rest  in  her  favor  so  far  as 
any  responsibility  or  duty  that  may  be  imposed 
upon  her  by  Federal  law  is  concerned.  No  State 
statute  of  this  character  has  any  modifying  effect 
whatever  upon  the  explicit  terms  of  a  Federal  tax- 
ing act.  The  act  of  Congress  of  September  8,  1916, 
creates  its  own  presumptions  and  defines  explicitly 
the  terms  under  which  exemption  from  tax  may  be 
claimed. 

You  will  note  that,  under  section  202,  paragraph 
C,  there  is  required  to  be  included  in  the  gross 
estate  of  a  decedent  all  the  interest  held  jointly  or 
as  tenants  in  the  entirety  by  the  decedent  and 
another  person,  "  except  such  part  thereof  as  may 


TREASURY  DECISIONS.  261 

T.  D.  2450. 

he  shown  to  have  originally  belonged  to  such  other 
person  and  never  to  have  belonged  to  the  decedent." 
Under  this  paragraph  of  the  taxing  act,  wherever 
the  public  records  show  property  in  the  name  of  the 
decedent,  the  presumption  is  that  it  wTas  the  sole 
property  of  the  decedent,  and  the  burden  of  proving 
that  another  person  owned,  prior  to  the  decedent's 
death,  any  interest  therein  is  not  upon  the  Govern- 
ment but  is  upon  the  estate. 

You  will  note  the  extremely  limiting  terms  of  the 
paragraph  quoted  above,  and  that  it  must  be  shown 
that  any  part  of  the  property  to  be  excluded  from 
the  gross  estate  must  have  actually  belonged  in  the 
first  instance  to  a  person  other  than  the  decedent 
and  that  it  has  never  been  owned  by  the  decedent. 
If,  under  the  Texas  law,  property  conveyed  to  a 
husband  or  wife  during  their  marriage  is  taken  by 
each  in  entirety  and  in  such  a  manner  that  it  could 
not  be  contended  that  any  specific  part  belonged  to 
either,  but  that  each  was  the  owner  of  all,  and  upon 
the  death  of  either  no  new  interest  or  title  vested 
in  the  survivor,  as  is  the  case  in  some  States,  the 
Government,  under  a  strict  and  technical  interpre- 
tation of  paragraph  C  of  section  202,  would  perhaps 
be  justified  in  demanding  that  the  whole  of  the 
property  thus  owned  be  included  as  a  portion  of 
the  gross  estate  of  the  decedent.  This,  however, 
does  not  seem  to  have  been  the  intent  of  Congress, 
and  it  has  heretofore  been  ruled  in  a  similar  case 
that  one-half  of  the  property  thus  jointly  ow'iied 


262  FEDERAL  ESTATE  TAX. 

T.  D.  2453. 

should  be  returned  as  a  portion  of  the  gross  estate 
of  the  decedent  husband  or  wife,  as  the  case  might 
be. 

In  the  case  of  the estate,  therefore,  you 

should  require  of  the  administratrix  in  due  time  the 
return  on  Form  706,  and  therewith  may  be  submitted 
any  evidence  available  to  the  administratrix  to 
establish  that  any  part  of  the  property  included  in 
the  gross  estate  was  actually  community  property 
of  the  decedent  and  his  wife  and  that,  therefore, 
but  one-half  thereof  is  to  be  treated  as  the  estate  of 
the  decedent. 

Eespectfully, 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


(T.  D.  2453) 

Estate  Tax. 

The  deductions  from  the  gross  estate  provided  in  section  203, 
paragraph  1,  are  limited  to  amounts  allowed  under  the  laws  of 
the  local  jurisdiction. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  March  7,  1917. 
Sir:    Receipt  is  acknowledged  of  your  letter  of 
the  3d  instant,  quoting  section  203,  paragraph  1,  of 


TREASURY  DECISIONS.  263 

T.  D.  2453. 

the  estate-taxing  act  and  inquiring  whether  the 
phrase  "such  other  charges  against  the  estate  as 
are  allowed  by  the  laws  of  the  jurisdiction"  is  inter- 
preted by  the  bureau  as  limiting  all  the  preceding 
clauses  of  the  paragraph;  that  is,  whether  any 
amounts  could  be  deducted  from  the  gross  estate 
because  of  funeral  expenses,  claims  against  the 
estate,  losses,  etc.,  which  were  in  excess  of  the 
amounts  allowable  under  the  laws  of  the  local  juris- 
diction. 

While  the  punctuation  and  construction  of  the 
paragraph  may  not  be  absolutely  conclusive  upon 
this  point,  it  is  the  opinion  of  this  office  that  the 
limitation  set  up  in  the  concluding  part  of  the  para- 
graph applies  to  all  the  items  enumerated  in  the 
paragraph;  that  is,  there  could  not  be  deducted 
from  the  gross  estate  in  determining  the  net  estate 
liable  to  tax  any  funeral  or  other  expenses  or  any 
losses  and  charges  which  were  in  excess  of  the 
amounts  allowable  under  the  laws  of  the  local  juris- 
diction as  credits  to  administrators  or  executors  in 
their  accounts  in  the  probate  courts. 

It  is  so  ruled. 

Respectfully, 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Mr. . 


264  FEDERAL  ESTATE  TAX. 

T.  D.  2454. 

(T.  D.  2454) 
Estate  Tax. 

Duties  of  heirs,  donees,  trustees,  fiduciaries,  transfer  agents, 
and  others  having  or  coming  into  possession  of  property  of  a 
decedent  whose  estate  is  liable  for  estate  tax. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  February  28,  1917. 
To  collectors  of  internal  revenue: 

Section  200  of  the  revenue  act  of  September  8, 
1916,  in  denning  the  term  "executor"  as  including, 
"if  there  is  no  executor  or  administrator,  any  per- 
son who  takes  possession  of  any  property  of  the 
decedent,"  clearly  intended  to  provide  that  wherever 
circumstances  are  such  that  the  Government  could 
not  proceed  against  an  administrator  or  executor 
for  satisfaction  of  the  requirements  of  the  taxing 
act  there  shall  be  no  failure,  because  of  inability  to 
hold  others  in  possession  responsible,  to  collect  the 
whole  tax  due. 

Careful  consideration  has  been  given  in  the  light 
of  this  intent  of  Congress  to  the  problem  of  deter- 
mining how  far  the  duties  of  filing  30-day  notice  and 
return  and  making  tax  payment  may  be  left  solely 
to  duly  appointed  executors  or  administrators,  and 
to  what  extent,  in  order  to  insure  the  collection  of 
tax  due,  others  in  possession  must  be  required  to 
assume  these  responsibilities.  As  a  result  of  this 
consideration  the  following  supplemental  regula- 
tions are  promulgated,  under  authority  of  section 
212  of  the  act. 


TREASURY  DECISIONS.  2G5 

T.  D.  2454. 

Estates  of  resident  decedents. 
Thirty-day  notice  (Form  705)  must  be  filed,  within 
30  days  after  death  of  the  decedent  whose  estate  is 
taxable,  by  others  than  executors  or  administrators, 
as  follows: 

(1)  By  the  surviving  husband  or  wife,  as  the  case 
may  be,  for  one-half  the  value  at  the  decedent's 
death,  of  community  property  owned  by  the  dece- 
dent and  the  survivor. 

(2)  By  the  first  taker  after  the  decedent  of  any 
of  decedent's  real  property  where  this  passes,  in 
accordance  with  the  local  law,  directly  to  the  heirs 
of  decedent. 

(3)  By  donees  who  have  received  within  two 
years  prior  to  the  decedent's  death  any  gift  of 
material  value  from  the  decedent,  or  who  have  re- 
ceived at  any  time  whatever  gifts  made  by  decedent 
in  contemplation  of,  or  intended  to  take  legal  effect 
at,  death. 

(4)  By  trustees  holding  property  conveyed  during 
lifetime  by  the  decedent  in  contemplation  of  death 
or  with  intent  to  provide  for  others  than  decedent 
at  or  after  decedent's  death,  regardless  of  the  date 
of  the  instrument  making  the  conveyance,  or  the 
date  of  possession  by  the  trustee,  or  the  date  of 
vesting  of  the  right  of  survivors  to  possession  or 
enjoyment  at  or  after  decedent's  death. 

(5)  By  fiduciaries  holding  property  of  any  kind 
jointly  or  in  entirety  for  the  decedent  and  another 
or  others. 


2GG  FEDERAL  ESTATE  TAX. 

T.  D.  2454. 

(6)  By  any  other  person,  persons,  joint-stock 
companies,  corporations,  or  associations  holding  at, 
or  taking  immediately  upon,  decedent's  death  any 
property  inclusive  in  the  gross  estate  under  the 
definition  of  section  202  of  the  taxing  act,  which 
property  may  not  be  taken  in  charge  by  decedent's 
executors  or  administrators,  if  any. 

When  the  collector  of  internal  revenue  shall  re- 
ceive Form  705,  filed  as  above  required,  he  shall 
proceed  as  indicated  in  Article  XII  of  regulations 
No.  37.  If,  at  the  expiration  of  one  year  from  de- 
cedent's death,  it  has  not  been  ascertained  that  an 
administrator  or  executor  has  been  appointed  for 
the  decedent's  estate,  the  collector  will  proceed  to 
secure  return  and  tax  payment  from  the  beneficiary 
or  beneficiaries,  in  accordance  with  Articles  XVI 
and  XVII  of  regulations  No.  37. 

Estates  of  nonresident  decedents. 
The  30-day  notice  (Form  705)  is  required  to  be 
filed  for  all  property  of  every  kind,  located  or 
legally  situate  in  this  country  (including  Hawaii 
and  Alaska),  by  those  agents  or  representatives, 
donees,  transferees,  trustees,  or  fiduciaries  of  a  de- 
cedent dying  domiciled  abroad,  whether  alien  or 
citizen  of  the  United  States.  The  notice  must  be 
filed  within  30  days  from  decedent's  death  with  the 
collector  of  internal  revenue  in  whose  district  the 
property  within  this  country  is  situate,  unless  the 
local  agent,  etc.,  having  the  property  in  charge 
knows  that  there  is  other  property  of  decedent  lo- 


TREASURY  DECISIONS.  267 

T.  D.  2454. 

cated  in  another  collection  district,  in  which  case 
the  notice  is  to  be  filed  with  the  collector  of  internal 
revenue,  Baltimore,  Md. 

If  it  be  not  possible  for  the  local  agent,  representa- 
tive, etc.,  to  file  the  notice  within  30  days  from 
death  of  the  nonresident,  the  penalty  denounced  in 
section  210  will  not  be  asserted  if  the  notice  is  filed 
within  30  days  from  the  day  upon  which  the  local 
agent,  representative,  etc.,  receives  information  of 
the  nonresident  decedent's  death. 

Each  collector  receiving  Form  705  showing  prop- 
erty of  a  nonresident  will  immediately  inform  the 
commissioner  of  the  fact.  A  record  will  be  kept  in 
the  commissioner's  office  from  which  it  can  be  de- 
termined whether  Forms  705  for  a  given  estate  have 
been  filed  in  more  than  one  collection  district,  in 
which  case  the  several  collectors  will  be  instructed 
to  forward  the  Forms  705  to  the  collector  at  Balti- 
more, Md. 

In  due  time,  if  the  administrator  or  executor  of 
the  nonresident  decedent  has  failed  to  file  return 
as  provided  in  section  203,  paragraph  (b),  and  pay 
the  tax  due,  the  collector  shall  require  such  return 
and  tax  payment  from  the  local  agent,  representa- 
tive, etc.  No  deductions  whatever  from  the  gross 
•  state  will  be  allowed  in  such  a  case  unless  all  the 
property  of  the  nonresident  decedent  is  shown  to  bo 
located  in  this  country  and  it  is  established  that  all 
has  been  returned  for  estate  tax.  Where  there  is 
more  than  one  holder  in  this  country  of  decedent 's 


268  FEDERAL  ESTATE  TAX. 

T.  D.  2454. 

property,  the  collector  will  aggregate  the  separate 
returns,  proceeding  in  accordance  with  Article 
XVII  of  regulations  No.  37. 

Under  no  circumstances  may  the  local  agent,  rep- 
resentative, etc.,  release  to  a  foreign  administrator 
or  executor  or  a  foreign  beneficiary  of  the  decedent 
any  property  within  this  country  at  the  time  of 
decedent's  death  until  either  (1)  the  tax  due  be- 
cause thereof  has  been  paid  or  (2)  ancillary  letters 
have  been  taken  out  in  this  country  or  otherwise 
provision  has  been  made  by  the  estate  for  the  sat- 
isfaction of  the  tax  lien  resting  upon  the  decedent's 
property  in  this  country.  When  such  ancillary  let- 
ters have  been  taken  out  or  such  provision  has  been 
made,  the  local  agent,  representative,  etc.,  shall  im- 
mediately inform  the  collector  fully  as  to  the  facts. 

An  administrator  or  executor  acting  in  a  foreign 
country  will  not  be  recognized  as  relieving  others  in 
charge  or  possession  of  a  decedent's  property  from 
responsibility  for  satisfying  the  requirements  of  the 
taxing  act  unless  and  until  he  has  made  return  and 
tendered  payment  of  all  tax  due.  The  penalty  de- 
nounced in  section  210  of  the  act  will  be  asserted 
against  every  agent,  representative,  etc.,  in  this 
country  releasing  to  a  foreign  administrator  or  ex- 
ecutor or  beneficiary  of  the  decedent  the  property 
within  this  country,  except  where  the  requirements 
of  this  regulation  have  been  complied  with. 

The  above  regulation  fully  applies  to  transfer 
agents  of  corporate  stock  or  bonds,  receiving  into 


TREASURY  DECISIONS.  269 

T.  D.  2454. 

possession  for  transfer  purposes  such  personalty 
of  a  nonresident  decedent.  The  transfer  shall  not 
be  effected  or  the  stock  or  bonds  released  to  the  for- 
eign administrator  or  executor  or  the  succeeding 
beneficiary  until  the  transfer  agent  shall  have  been 
fully  assured  either  that  the  tax  due  has  been  paid 
or  that  ancillary  letters  have  been  taken  out  in  this 
country  or  provision  otherwise  made  for  the  satis- 
faction of  the  tax  lien  against  the  estate. 

This  ruling  applies  also  to  safe-deposit  com- 
panies, warehouses,  and  similar  custodians  of  prop- 
erty in  this  country  of  a  nonresident  decedent,  to 
brokers  holding  as  collateral  securities  belonging 
to  a  nonresident  decedent,  to  banking  institutions 
holding  money  of  nonresident  decedents  on  deposit 
or  for  any  specific  purpose,  such  as  the  purchase 
of  goods,  so  long  as  the  title  rests  in  the  nonresi- 
dent decedent,  his  estate  or  his  heirs,  and  to  debtors 
in  this  country  of  nonresident  decedents. 

It  does  not  apply  to  carriers  of  property  of  a  non- 
resident decedent  while  such  property  is  in  their 
charge  for  the  purpose  of  transit. 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 

18 


270  FEDERAL  ESTATE  TAX. 

T.  D.  2477. 

(T.   D.   2477) 
Estate  Tax. 

Property  passing  under  general  power  of  appointment  is  tax- 
able as  a  portion  of  the  gross  estate  of  the  decedent  appointor. 

Treasury  Department, 

Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  April  7,  1917. 
To  collectors  of  internal  revenue: 

It  is  held  that  where  a  decedent  exercises  a  gen- 
eral power  of  appointment  as  donee  under  the  will 
of  a  prior  decedent  the  property  so  passing  is  a 
portion  of  the  gross  estate  of  the  decedent  ap- 
pointor. See  Brandies  v.  Cochrane  (112  U.  S.  344, 
352);  Olney  v.  Balch  (154  Mass.  318);  Clapp  v. 
Ingraham  (126  Mass.  200);  Rogers  v.  Hinton  (62 
N.  C.  101) ;  Tompson  v.  Towne  (2  Vera.  319) ;  Bain- 
ton  v.  Ward  (2  Atk.  172). 

When  property  is  transferred  by  a  special  or 
limited  power  of  appointment,  the  question  of  tax- 
ability will  depend  upon  the  terms  of  the  instru- 
ment by  which  the  donee  of  the  power — the  appoin- 
tor— acts.  The  facts  in  every  such  case  should  be 
reported  fully  to  the  commissioner  in  order  that  de- 
cision as  to  tax  liability  may  be  made. 

David  A.  Gates, 
Acting  Commissioner  of  Internal  Revenue. 

(Note:  This  Treasury  Decision  was  modified  by 
Treasury  Decision  3088.) 


TREASURY  DECISIONS.  271 

T.  D.  2483,  2490. 

(T.  D.  2483) 

Estate  Tax. 

Computation  of  dividends  upon   stock  and   interest  upon   bonds 
owned  by  decedent  whose  estate  is  taxable. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  1).  C,  April  20,  1917. 
Sir:     Receipt  is  acknowledged  of  your  letter  of 
the  16th  instant  with  regard  to  accrued  income  on 
stock  in  corporations  owned  by  a  decedent  at  the 
time  of  death,  and  in  reply  you  are  informed  that 
there  should  be  included  in  the  gross  estate  the  en- 
tire dividend  declared  prior  to  the  day  of  death, 
whether  received  before  or  after  that  day.    No  part 
of  a  dividend  declared  after  death  should  be   in- 
cluded in  the  gross  estate. 

With  regard  to  bonds,  obviously  a  different  rule 
applies  and  the  actual  interest  accrued  to  the  day 
of  death  must  be  returned  as  a  portion  of  the  gross 
estate. 

Respectfully, 

David  A.  Gates, 
Acting  Commissioner  of  Interned  Revenue. 
Mr.  —    . 


(T.  D.  2490) 

Estate  Tax. 

Duties  of  corporations   and  their  transfer   agents,   registers   of 
bonds,  and  paying  agents. 


272  FEDERAL  ESTATE  TAX. 


T.  D.  2490. 


Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  May  14,  1917. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
The  duties  under  Title  II  of  the  revenue  act  of 
September  8,   1916,   of  corporate   transfer  agents, 
registers  of  bonds,  and  paying  agents  and  of  cor- 
porations performing  for  themselves  the  duties  cus- 
tomarily performed  by  such  agents  are  denned  as 
follows : 

(1)  Where  the  transfer  of  stock  or  bonds  or  pay- 
ment of  dividends  or  interest  theretofore  the  legal 
property  of  a  decedent,  whether  a  resident  or  a  non- 
resident, is  made  to  or  upon  the  order  of  an  execu- 
tor or  administrator  acting  under  letters  granted 
in  the  United  State,  Hawaii,  or  Alaska,  the  corpo- 
rate agent  or  officer  will  not  be  required  to  file  the 
30-day  notice,  make  return,  or  pay  tax. 

(2)  The  30-day  notice  is  required  to  be  filed  when- 
ever a  corporation,  its  transfer  agent,  register,  or 
paying  agent  is  called  upon  to  make  a  transfer  of 
stock  or  bonds,  or  to  pay  interest  or  dividends  to 
any  person  succeeding  in  right  thereto  a  stockholder 
or  bondholder  who,  since  September  8,  1916,  has 
died  domiciled  outside  the  United  States,  Hawaii  or 
Alaska,  unless  such  successor  in  interest  is  an  ex- 
ecutor or  administrator  of  the  nonresident  decedent 
acting  under  letters  granted  within  the  United 
States,  Hawaii,  or  Alaska. 


TREASURY  DECISIONS.  273 

T.  D.  2490. 

(3)  The  30-day  notice  will  show  the  name  and  ad- 
dress at  the  time  of  death  of  the  nonresident  de- 
cedent, a  description  and  valuation  of  the  property 
to  be  transferred  or  paid,  and  the  name,  designation 
(executor  or  other),  and  address  of  the  person  to 
whom  transfer  or  payment  is  made  and  wall  be 
signed  by  the  proper  officer  or  agent  of  the  corpo- 
ration. A  form  of  notice  to  be  known  as  Form  714 
is  in  preparation  and  will  be  furnished  collectors 
for  distribution.  In  the  meantime  informal  notice 
giving  all  the  above  required  data  must  be  filed. 

(4)  This  notice  must  be  filed  for  dividends  de- 
clared prior  to  the  day  of  death  and  for  interest 
payable  after  death  to  the  extent  of  the  portion  ac- 
crued to  the  day  of  death. 

(5)  If  this  notice  be  filed  as  required  either 
within  30  days  from  death  or  immediately  upon  re- 
ceipt of  the  order  for  transfer  or  payment,  the 
transfer  or  payment  need  not  be  postponed.  The 
collector,  immediately  upon  receipt  of  the  notice, 
will  communicate  with  the  foreign  executor  or  suc- 
ceeding party  in  interest,  advising  of  the  require- 
ments of  the  estate  taxing  act  and  furnishing  blank 
Forms  706  for  the  making  of  the  return.  If,  within 
the  legal  period,  the  tax  is  not  paid,  proceedings  will 
lie  instituted  under  section  208  of  the  taxing  act  for 
the  sale  of  the  property  and  the  satisfaction  of  the 
tax. 

(6)  In  every  case,  immediately  upon  receipt  of 
the  30-day  notice  herein  referred  to,  the  collector 


274  FEDERAL  ESTATE  TAX. 


T.  D.  2490. 


will  notify  the  commissioner  of  the  facts,  so  that 
from  a  record  kept  in  the  commissioner's  office  it 
may  be  determined  whether  property  of  the  non- 
resident is  located  in  more  than  one  collection  dis- 
trict, in  which  case  the  proper  information  and  in- 
structions will  be  communicated  by  the  commis- 
sioner to  the  collector  at  Baltimore.  It  is  essential 
that  collectors  compty  promptly  with  this  require- 
ment, so  that  in  every  case  the  total  estate  within 
the  United  States  and  the  true  tax  may  be  ac- 
curately determined. 

(7)  This  regulation  is  promulgated  in  view  of 
present  international  conditions,  and  is  subject  to 
revocation  should  it  be  demonstrated  that  the  ac- 
commodation herein  made  to  corporations  and  their 
agents  results  in  insecurity  of  the  revenue.  This 
regulation  is  not  to  be  construed  in  any  degree  as 
modifying  the  interpretation  hitherto  given  by  the 
department  of  the  term  "executor"  as  used  in  sec- 
tion 200  of  the  act  of  September  8, 1916. 

(8)  This  regulation  supplants  former  regulations 
affecting  corporate  transfer  and  paying  agents  and 
registers  of  corporate  bonds  only  in  so  far  as  the 
specific  terms  of  such  former  regulations  are  in- 
consistent herewith. 

David  A.  Gates, 
Acting   Commissioner   of   Interna]   Revenue. 
Approved: 

Byron  R.  Newton, 

Acting  Secretary  of  the  Treasury. 


TREASURY  DECISIONS.  275 

T.  D.  2497. 

(T.  D.  2497) 

Estate  Tax. 

Instruction*,  witli  tables,  relating  to  the  computation  of  the  5 
per  cent  discount  to  be  allowed  on  estate  tax  when  paid  before 
one  year  after  the  death  of  decedent. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  I).  C,  June  4,  1917. 

To  collectors  of  internal  revenue: 

(1)  Numerous  inquiries  have  been  addressed  to 
the  bureau  relative  to  the  method  of  computing  the 
5  per  cent  discount  allowable  on  estate  taxes  where 
said  taxes  are  paid  in  less  than  one  year  after  the 
death  of  the  decedent,  as  to  accepting  partial  pay- 
ments of  estate  taxes  based  on  tentative  returns, 
and  as  to  the  proper  manner  of  reporting  said 
taxes  on  Form  22. 

(2)  Tables  showing  the  discount  on  $1  from  1  to 
364  days  have,  therefore,  been  prepared  and  arc 
hereto  appended.  Collectors  and  others  concerned 
in  computing  the  discount  should  use  these  tables 
exclusively.  Care  should  be  taken  to  determine  the 
number  of  days  remaining  in  the  month  during 
which  payment  is  made  and  count  forward  actual 
days  until  due  date.  For  example:  Date  of  death, 
March  4,  1917,  payment  made  September  13,  1**17 : 
there  would  be  17  days  remaining  in  September, 
October  31,  November  30,  December  31,  Januarj 
31,  February  28,  and  four  days  in  March,  the  due 


276  FEDERAL  ESTATE  TAX. 

T.  D.  2497. 

date,  making  a  total  of  172  days  for  which  discount 
is  allowable. 

(3)  Now,  in  computing  the  discount,  find  in  the 
table  the  discount  on  $1  for  172  days  and  multiply 
the  gross  tax  by  this.  The  result  will  be  the  dis- 
count allowable,  which,  deducted  from  the  full  gross 
tax,  will  give  the  amount  of  tax  on  the  date  payment 
is  made. 

Executors  in  computing  discount  will  use  as  the 
date  of  payment  the  date  when  said  payment  will 
actually  be  placed  in  the  collector's  hands,  as  the 
statute  fixes  that  as  the  date  of  payment  regardless 
of  the  date  of  remittance  or  mailing. 

(4)  In  reporting  estate  taxes  on  the  assessment 
list,  the  collector  should  in  every  case  append  a  foot- 
note on  Form  23  as  follows:  Gross  tax,  $ ;  paid 

(give  date);  discount  for  days,  $ . 

(5)  Frequently,  executors  will  file  a  return  and 
request  the  collector  to  advise  them  of  the  amount 
of  tax  due,  less  discount.  In  such  cases,  the  collec- 
tor should  compute  the  discount  to  some  future 
date,  advising  the  executor  of  the  amount  necessary 
to  satisfy  the  tax  on  the  date  named,  making  it  clear 
that  the  computation  is  based  on  the  presumption 
that  the  money  will  be  in  his  (the  collector's)  hands 
on  that  date. 

(6)  Again,  executors  file  a  tentative  return  and 
ask  permission  to  make  a  partial  payment  of  the 
tax  due,  usually  specifying  a  certain  amount,  pro- 
vided the  discount  on  this  amount  is  allowed. 


TREASURY  DECISIONS.  277 

T.  D.  2497. 

(7)  The  department  sees  no  objection  to  collec- 
tors accepting  such  partial  payments  and  reporting 
the  same  on  their  assessment  list  as  advance  pay- 
ments. Care  should  be  taken,  however,  to  compute 
the  present  worth  of  such  payments  in  order  to 
determine  how  much  of  the  tax  is  discharged.  The 
computations  in  such  case  should  be  filed  with  the 
tentative  return  in  order  that  when  a  complete  or 
fiscal  return  is  filed  the  balance  of  the  tax  due  can 
readily  be  determined.  The  present  worth  may 
readily  be  found  by  use  of  the  table  as  follows: 
From  $1  deduct  the  amount  of  discount  on  $1  from 
date  of  payment  to  due  date.  Divide  the  amount  of 
tax  paid  by  this  remainder,  and  the  quotient  will  be 
the  present  worth  of  the  amount  of  tax  liability 
discharged. 

(8)  For  example,  a  partial  payment  of  $300,000 
is  tendered  278  days  before  due  date.  By  the  table 
5  per  cent  discount  on  $1  for  278  days  is  found  to 
be  $0.0380821;  $1  less  $0.0380821  leaves  $0.9619179; 
$300,000  divided  by  $0.9G19179  equals  $311,876.82, 
the  present  worth  or  the  amount  of  tax  liability  dis- 
charged by  the  partial  payment. 

(9)  Hereafter  in  reporting  estate  tax  on  Form 
22  it  will  only  be  necessary  to  report  the  total 
amount  collected  under  each  act.  The  discount  al- 
lowed will  likewise  be  reported  for  statistical  pur- 
poses on  Form  22  in  totals  only.  In  cases  like  that 
described   in   paragraph   8   the   difference   between 


278  FEDERAL  ESTATE  TAX. 


T.  D.  2513. 


the  money  paid  and  the  present  worth  would  be  re- 
garded as  discount  in  reporting  on  said  form. 

David  A.  Gates, 
Acting  Commissioner  of  Internal  Revenue. 

(There  follows  a  table  for  computing  the  amount 
of  discount.  The  right  to  discount  is  now  abolished, 
and  the  table  is  no  longer  in  use.) 


(T.  D.  2513) 
Estate  Tax. 

Instructions  for  executing  Form  706,  revised  July,  1917. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  July  16,  1917. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
The   following   instructions   for  executing   Form 
706,  revised  July,  1917,  are  issued.    An  allotment  of 
this  decision  (No.  2513)  will  be  furnished  each  col- 
lector, and  a  copy  should  be  transmitted  with  Form 
706  to  every  executor  or  other  representative  of  an 
estate  required  to  make  return.    A  copy  of  Regula- 
tions No.  37,  revised  May,  1917,  should  also  be  fur- 
nished in  every  such  case. 

1.  If  decedent  maintained  more  than  one  resi- 
dence, his  principal  residence  (actual  domicile)  de- 
termines the  internal-revenue  district  in  which  re- 
turn must  be  filed  and  tax  paid. 


TREASURY  DECISIONS.  279 

T.  D.  2513. 

2.  rf  decedent  was  a  nonresident  and  his  sole 
property  within  the  United  States,  Hawaii,  or 
Alaska  was  stock  or  bonds  of  an  American  corpora- 
tion, his  return  should  be  filed  with  the  collector  in 
whose  district  the  head  office  of  the  corporation  is 
located,  unless  the  estate  has  a  representative  in 
this  country  having  the  stocks  or  bonds  in  charge, 
in  which  case  the  return  may  be  filed  with  the  col- 
lector in  whose  district  the  representative  has  his 
office. 

3.  In  describing  realty  it  may  not  be  necessary 
to  recite  the  whole  description  on  the  deed,  but  suf- 
ficient data  should  be  given  in  each  case  to  permit  an 
immediate  and  exact  location  by  a  Government  of- 
ficer. For  example:  W.  V2,  sec.  2,  tp.  20,  Madison, 
111.;  or  House  and  lot,  125,  So.  Main  St.,  Auburn, 
N.  Y. 

4.  If  accrued  income  has  been  reduced  to  cash 
prior  to  death  and  is  included  in  "cash  in  bank"  or 
otherwise  accounted  for  on  the  return,  it  should  not 
be  set  up  in  the  income  column. 

5.  Under  item  2  there  must  be  shown  every  gift  or 
transfer  of  material  value  made  or  effected  by  de- 
cedent within  two  years  prior  to  day  of  death.  With 
the  return  may  be  submitted  such  evidence  as  the 
estate  elects  to  submit  showing  whether  the  gift  or 
transfer  was  made  in  contemplation  of  death,  and 
the  question  of  taxability  will  be  ruled  upon  by  the 
Commissioner  before  the  assessment  against  the 
estate  is  confirmed.     Every  gift  or  transfer  made 


280  FEDERAL  ESTATE  TAX. 

T.  D.  2513. 

in  contemplation  of  or  intended  to  take  effect  at 
death  must  be  returned,  regardless  of  the  date  when 
made  or  effected. 

6.  The  highest  selling  price  of  stocks  and  bonds 
on  the  day  of  death  fixes  the  value  to  be  returned; 
or  if  no  sale,  then  the  highest  bid  price.  If  the 
stocks  or  bonds  are  not  listed  on  the  market,  the 
executor  may  set  up,  from  the  best  evidence  he  pos- 
sesses, a  value  that  he  deems  the  true  value  as  of  the 
day  of  decedent's  death. 

7.  If  the  bulk  of  the  estate  is  community  property 
held  in  legal  partnership  by  decedent  and  spouse, 
its  value  should  not  be  shown  under  item  4,  but  de- 
cedent's legal  share  should  be  returned  under  the 
several  items,  realty,  stocks  and  bonds,  etc.;  other- 
wise the  jointly  owned  property  should  be  exactly 
described  under  item  4. 

8.  No  item  of  deductions  can  be  taken  in  excess 
of  an  amount  actually  expended,  or  if  expended,  in 
excess  of  the  limit,  if  any,  set  upon  such  expendi- 
ture by  the  local  law. 

9.  Mortgages  resting  on  decedent's  property 
should  be  shown  under  "Deductions"  and  the  full 
value  of  the  mortgaged  realty  should  be  shown  un- 
der item  1  of  "Gross  estate."  A  similar  rule  must 
be  applied  with  regard  to  hypothecated  personalty. 

10.  It  should  be  noted  that  deductible  losses  are 
strictly  limited  to  those  arising  from  fires,  storms, 
shipwreck,  or  other  casualty,  and  theft,  when  not 
compensated  for,  by  insurance  or  otherwise. 


TREASURY  DECISIONS.  281 

T.  D.  2513. 

11.  If  discount  is  taken  in  paying  State  inherit- 
ance or  transfer  tax,  only  the  net  amount  of  the 
payment  can  be  deducted. 

12.  A  nonresident's  estate  will  show  under  items 
of  the  "Gross  estate"  only  the  gross  estate  within 
the  United  States,  but  will  show  under  "Deductions" 
the  entire  legal  deductions  wherever  incurred.  It 
will  then  show  in  the  space  subjoined  to  "Recapitu- 
lation" the  whole  gross  estate  wherever  situated 
and  compute  in  accordance  with  Article  XXIII  of 
Regulations  No.  37,  revised  May,  1917,  the  allow- 
able share  of  total  deductions. 

13.  The  initial  rates  of  tax  apply  if  the  decedent 
died  between  September  9,  1916,  and  March  2,  1917, 
inclusive.  The  rates  50  per  cent  higher  apply  if 
the  decedent  died  on  or  after  March  3,  1917. 

14.  In  computing  discount,  follow  carefully  T.  D. 
No.  2497  of  June  4,  1917. 

15.  In  the  jurat,  cross  out  the  inapplicable  word, 
so  that  the  return  will  certainly  show  whether  it  is 
submitted  as  tentative  or  final. 

16.  Further  instructions  are  set  forth  fully  in 
Regulations  No.  37,  revised,  copy  of  which  may  be 
secured  from  the  collector. 

17.  Remember  that  return  and  tax  payment  must 
be  in  the  collector's  hands  before  the  year  from  the 
day  of  death  has  expired. 

David  A.  Gates, 
Acting  Commissioner  of  Internal  Revenue. 


282  FEDERAL  ESTATE  TAX. 

T.  D.  2524,  2529. 

(T.  D.  2524) 

Estate  Tax — Inheritance  Taxes. 

State  inheritance  taxes  not  deductible  under  Title  II,   act  of 
September  8,  1916.— T.  D.  2395  of  November  17,  1916,  revoked. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.   C,  September  10,  1917. 
To  collectors  of  internal  revenue: 

An  exhaustive  study  of  the  nature  of  State  in- 
heritance taxes  has  led  this  office  to  the  conclusion 
that  amounts  paid  to  States  on  account  of  inherit- 
ance, succession,  or  legacy  taxes  are  not  "such  other- 
charges  against  the  estate  as  are  allowed  by  the 
laws  of  the  jurisdiction,"  and  accordingly  are  not 
deductible  in  arriving  at  the  amount  of  Federal 
estate  tax.  T.  D.  2395  of  November  19,  1916,  is 
hereby  revoked. 

David  A.  Gates, 
Acting  Commissioner  of  Internal  Revenue. 

Approved : 

Byron  R.  Newton, 

Acting  Secretary  of  the  Treasury. 


(T.  D.  2529) 
Estate  Tax. 

Household  effects  and  like  personalty  used  by  husband  and 
wife  in  the  marriage  relation  are  presumed  to  be  the  property  of 
the  husband,  and,  in  the  absence  of  sufficient  evidence  to  rebut 
this  presumption,  must  be  returned  as  a  portion  of  his  groBS 
estate. 


TREASURY  DECISIONS.  283 

T.  D.  2529. 

Treasury  Department, 

Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  October  4,  1917. 
To  collectors  of  internal  revenue  and  interrud-revt 
nue  agents: 

In  reviewing  returns  on  Form  706  in  this  office,  it 
is  found  that  oftentimes  there  are  reported  no 
household  goods  or  other  miscellaneous  personalty 
of  that  character.  This  fact  is  brought  to  the  at- 
tention of  the  examining  officer,  and  in  most  cases 
results  in  the  discovery  of  the  existence  of  such 
property  belonging  to  the  estate  of  the  decedent. 
In  other  cases  the  examining  officers  have  been  re- 
porting the  substance  of  the  following:  "Widow  of 
deceased  claims  the  household  effects,  etc.,  as  her 
own  separate  property." 

Statements  to  the  above  effect,  unexplained,  are 
not  sufficient  to  relieve  the  estate  from  returning 
and  paying  tax  upon  the  household  furniture  used 
by  the  decedent  in  the  household  occupied  by  him- 
self and  wife.  Upon  the  decease  of  a  husband  the 
household  goods  and  other  chattels  used  by  hus- 
band and  wife  in  the  marriage  relation  are  pre- 
sumed to  be  the  property  of  the  husband.  If  the 
wife  claims  the  same  as  her  separate  property,  she 
has  the  burden  of  establishing  that  claim. 

There  are  certain  situations  where  the  widow's 
claim  will  not  be  questioned,  and  will  consequently 
relieve  the  estate  from  returning  the  household 
goods  as  part  of  the  gross  estate  of  the  deceased 


284  FEDERAL  ESTATE  TAX. 


T.  D.  2529. 


husband.  All  that  is  required  in  such  cases  is  suf- 
ficient evidence  of  the  existence  of  the  facts  in  ques- 
tion. Such  situations  are  as  follows:  (1)  Where 
the  articles  of  household  furniture  were  owned  by 
the  wife  prior  to  marriage;  (2)  where  the  wife  has 
purchased  the  household  effects  during  coverture 
with  her  separate  funds;  (3)  where  the  household 
effects  represent  gifts  from  a  third  person  to  the 
wife  individually  during  coverture. 

It  is  not  at  all  uncommon,  however,  that  the  house- 
hold effects  have  been  purchased  by  the  husband 
since  the  marriage  and  at  his  death  the  wife  claims 
that  the  decedent  made  her  a  gift  of  the  various 
articles  during  the  marriage,  although  the  articles 
have  never  left  the  possession  of  the  husband — i.  e., 
they  remain  in  the  household  occupied  by  the  hus- 
band and  wife  and  are  used  by  them  jointly.  Such 
property  is  presumed  to  be  owned  by  the  husband, 
and  if  the  wife,  or  any  other  person  for  that  matter, 
claims  the  household  effects  as  a  gift  from  the  de- 
ceased the  burden  of  proving  the  gift  rests  upon 
the  person  asserting  it.  A  gift  from  husband  to 
wife  must  be  clearly  established.  There  must  be 
clear  and  incontrovertible  evidence  of  the  delivery 
of  the  property  by  the  husband  with  the  intention  of 
divesting  himself  of  all  dominion  and  control  and  of 
vesting  title  in  the  wife.  The  requirements  neces- 
sary to  a  valid  executed  gift  must  be  present.  If  the 
gift  be  in  contemplation  of  death,  of  course  another 
question  would  arise. 


TREASURY  DECISIONS.  285 

T.  D.  2530. 

The  following  proposition  has  been  announced  by 
the  courts  and  is  believed  by  this  office  to  be  sound: 
To  constitute  a  valid  gift  there  must  be  an  absolute 
transfer  of  the  property  from  donor  to  the  donee, 
taking  effect  immediately,  and  fully  executed  by  a 
delivery  of  the  property  by  the  donor,  and  the 
acceptance  thereof  by  the  donee.  It  is  essential  that 
the  transaction  should  be  fully  executed  by  the 
delivery  of  the  property  to  the  donee,  or  to  some 
person  for  him.  In  several  States  statutes  have 
been  enacted  providing  that  no  gift,  except  by  deed 
or  will,  shall  be  valid  unless  actual  possessesion 
shall  come  to  and  remain  with  the  donee  or  his 
agent,  and  if  the  donor  and  donee  reside  together 
at  the  time  of  the  gift,  possession  by  the  donee  at 
their  place  of  residence  is  not  a  sufficient  possession 
within  the  meaning  of  the  statute. 

The  foregoing  should  be  carefully  considered 
when  examining  officers  are  investigating  the  com- 
pleteness and  accuracy  of  estate-tax  returns. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2530) 
Estate  Tax. 

Bonds  of  domestic  corporations  owned  by  nonresident  decedents, 
such  bonds  being  physically  situate  outside  of  the  United  States, 
are  not  returnable  as  a  portion  of  the  gross  estate  of  said  decedent. 
19 


286  FEDERAL  ESTATE  TAX. 

T.  D.  2530. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Kevenue, 

Washington,  D.  C,  October  4,  1917. 

To  collectors  of  internal  revenue  and  internal-reve- 
nue agents: 

Section  202  of  the  revenue  act  of  September  8, 
1916,  in  defining  the  gross  estate,  provides  that  stock 
in  a  domestic  corporation  owned  and  held  by  a  non- 
resident decedent  shall  be  deemed  property  within 
the  United  States.  The  holding  of  this  office  has 
been  that  bonds  of  a  domestic  corporation  owned 
and  held  by  a  nonresident  decedent  were  likewise 
deemed  property  within  the  United  States  and  tax- 
able as  a  portion  of  the  gross  estate  of  the  decedent. 

This  question  has  had  careful  reconsideration, 
and  it  is  the  opinion  of  this  office  that  the  language 
of  the  section  of  the  act  above  referred  to  does  not 
evidence  the  intention  of  Congress  to  impose  a  tax 
upon  bonds  of  a  domestic  corporation  owned  and 
held  by  a  nonresident  decedent  when  such  bonds 
are  physically  situate  outside  of  the  United  States, 
Hawaii,  or  Alaska  at  the  time  of  the  death  of  the 
nonresident  owner. 

It  is  clear,  however,  that  Congress  has  the  power 
and  evidenced  an  intention  in  the  act  above  referred 
to  to  impose  a  tax  upon  bonds,  both  foreign  and 
domestic,  owned  by  a  nonresident  decedent,  which 
bonds  are  physically  situate  in  the  United  States, 
Hawaii,  or  Alaska  at  the  time  of  the  owner's  death, 


TREASURY  DECISIONS.  287 

T.  D.  2531. 

and  such  bonds  must  be  returned  as  a  portion  of 
his  gross  estate. 

It  is,  of  course,  clear  that  bonds,  both  foreign 
and  domestic,  owned  by  a  resident  are  taxable,  re- 
gardless of  where  such  bonds  are  situate  at  the  time 
of  the  owner's  death. 

Rulings  of  this  office  announced  in  regulations 
and  Treasury  decisions  inconsistent  with  and  con- 
trary to  the  above  are  hereby  revoked. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2531) 
Estate  Tax. 

Interpretation  of  the  provision  of  section  203  (a)  (1)  of  the 
act  of  September  8,  1916,  relating  to  the  deductibility  of  amounta 
expended  for  support  of  dependents. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  October  4,  1917. 
To  collectors  of  internal  revenue,  revenue  agents, 
and  others  concerned: 
The  act  of  September  8,  1916,  section  203  (a)  (1), 
provides  that  there  may  be  deducted  from  gross 
estate  amounts  which  have  been  expended  for  "sup- 
port during  the  settlement  of  the  estate  of  those  de- 
pendent   upon    the    decedent."      It    is    plain    that 
Congress,  in  enacting  this  provision,  intended  that 
there  should  be  allowed  as  a  deduction  from  gross 


288  FEDERAL  ESTATE  TAli 


T.  D.  2531. 


estate  only  the  amount  actually  expended  by  the 
estate  for  the  support  of  actual  dependents  of  the 
decedent.  The  regulation  made  in  pursuance  of  this 
provision  requires  the  existence  of  three  things  be- 
fore the  amount  claimed  as  a  deduction  under  this 
item  is  allowable:  (1)  A  bona  fide  disbursement  by 
the  executor,  (2)  for  the  support  of  those  actually 
dependent  upon  the  decedent,  and  (3)  in  an  amount 
authorized  by  the  local  law  for  that  specific  purpose. 

First.  In  view  of  the  language  of  the  taxing  act, 
there  must  be  an  actual  expenditure  of  money — not 
a  mere  delivery  to  the  dependent  by  the  executor  of 
household  goods  or  other  miscellaneous  personalty 
of  that  character.  It  is  obvious  that  the  turning 
over  of  furniture  and  such  personalty  to  the 
dependent  does  not  contribute  to  that  dependent's 
support  unless  the  furniture  is  sold  and  the  proceeds 
are  so  used.  Therefore,  provisions  in  the  statutes 
of  the  various  States  to  the  effect  that  the  widow 
is  entitled  to  family  pictures,  wearing  apparel,  etc., 
and  to  certain  household  goods  in  lieu  of  an  award, 
has  reference  to  the  widow's  exemption  and  has  no 
application  in  determining  the  deductibility  of  an 
amount  paid  for  the  support  of  dependents. 

Second.  The  persons  for  whose  support  the 
money  is  expended  must  be  actually  dependent  upon 
the  deceased,  otherwise  the  amount  (even  though 
actually  expended  for  the  support  of  the  widow  or 
children)  is  not  an  allowable  deduction.  If  the  per- 
sons for  whose  support  money   is  expended  have 


TREASURY  DECISIONS.  289 

T.  D.  2531. 

means  ample  for  their  support,  obviously  they  are 
not  dependents,  and  any  amounts  paid  for  their 
support  are  not  deductible.  If  the  alleged  de 
pendents  are  beneficiaries  of  the  estate,  it  is  clear 
from  the  wording  of  the  act  that  the  phrase  "sup- 
port during  the  settlement  of  the  estate"  refers  to 
the  period  elapsing  between  the  date  of  decedent's 
death,  at  which  time  his  contribution  to  the  support 
of  dependent  ceases,  and  the  date  of  the  actual  de- 
livery of  devised  property  to  the  beneficiary  by  the 
personal  representative  of  deceased.  It  follows  as  a 
natural  consequence  that  when  the  dependent  bene- 
ficiaries come  into  possession  of  property  sufficient 
for  their  support  and  maintenance  they  cease  to  be 
dependents  and  money  expended  for  their  support 
after  such  date  is  not  deductible. 

Third.  In  order  to  be  deductible,  the  amount  ac- 
tually expended  for  the  support  of  actual  dependents 
must  not  exceed  the  amount  which  is  allowed  for 
the  specific  purpose  by  the  laws  of  the  State  having 
jurisdiction  over  the  administration  of  decedent's 
estate.  The  amount  in  all  cases  will  not  necessarily 
equal  the  amount  allowed  under  the  local  law.  It  is 
not  uncommon  in  the  various  States  that  a  maxi- 
mum amount  is  specified  in  the  statutes  to  be  al- 
lowed dependents  for  their  support.  In  certain 
States  appraisers  are  appointed  by  the  court  to  fix 
an  award  and  judgment  is  rendered  against  the  ex- 
ecutor for  the  amount  arrived  at  by  them.  These 
amounts  may  exceed  what  is  actually  expended  for 


290  FEDERAL  ESTATE  TAX. 

T.  D.  2535. 

the  support  of  dependents.  In  that  case  the  excess 
over  actual  expenditures  for  support  is  not  an  al- 
lowable deduction  in  determining  estate  tax. 

The  following  query  or  its  substance  is  often 
made  to  this  office:  "Will  it  not  be  allowable,  in 
making  reports  of  investigations  of  Form  706,  where 
a  deduction  is  claimed  for  'support  of  decedent's  de- 
pendents,' to  merely  establish  the  fact  that  ap- 
praiser's fixed  award  which  was  approved  and 
judgment  rendered  therefor?"  In  view  of  the  de- 
tailed interpretation  of  the  provision  in  the  act  re- 
lating to  deduction  for  support  of  dependents  given 
above,  this  question  is  necessarily  answered  in  the 
negative. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2535) 
Estate  Tax. 

Increase  in  rates  of  taxation  upon  estates  of  decedents  dying 
on  and  after  October  4,  1917.  This  increase  does  not  apply  to 
estates  of  decedents  dying  while  serving  in  the  military  or 
naval  forces  of  the  United  States  under  certain  conditions. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  October  9,  1917. 
To  collectors  of  internal  revenue  and  internal  reve- 
nue agents: 

The  revenue  act  of  October  3,  1917,  by  amend- 
ment to  the  original  act  of  September  8,  1916,  as 


TREASURY  DECISIONS. 


291 


T.  D.  2535. 


amended  by  the  act  of  March  3,  1917,  increases  the 
graduated  rates  of  taxation  upon  the  taxable  estates 
of  decedents  dying  after  the  passage  thereof.  In 
view  of  the  fact  that  this  is  the  second  amendment 
providing  increased  rates  over  those  contained  i:i 
the  original  act,  it  is  deemed  advisable,  in  order  to 
secure  uniformity  in  results  and  avoid  confusion, 
that  the  following  tabulation  be  brought  specially 
to  the  attention  of  those  officers  whose  duties  in- 
clude the  computation  of  taxes  upon  the  net  estates 
of  decedents. 


Rates  of  taxation  upon  net  estates. 

Date  of  Death. 


Net  estate  not    exceeding    $50,000 

Net  estate  $50,000  to  $150,000... 

Net  estate  $150,000  to  $250,000.. 

Net  estate  $250,000  to  $450,000.. 

Net  estate  $450,000  to  $1,000,000. 

Net  estate  $1,000,000  to  $2,000,000 

Net  estate  $2,000,000  to  $3,000,000 

Net  estate  $3,000,000  to  $4,000,000 

Net  estate  $4,000,000  to  $5,000,000 

Net  estate  $5,000,000  to  $8,000,000 

Net  estate  $8,000,000  to  $10,000,000 

Net  estate  exceeding  $10,000,000.  .  . 


Sept.  9, 
1916, to 
Mar.  2, 
1917,  in- 
clusive. 
Per  cent. 

1 

2 

3 

4 

5 

6 

7 

8 

9 
10 
10 
10 


Mar.  3, 
1917,  to 
Oct.  3, 
1917,  in- 
clusive. 
Per  cent. 

iy2 

3 

41/2 
6 

"!_> 

9 
IOV2 
12 
13i  2 
15 
15 
15 


On  and 
after 
Oct.  4, 
1917. 

Per  cont. 

2 

4 

6 

8 
10 
12 
14 
16 
18 
20 
22 
25 


292  FEDERAL  ESTATE  TAX. 

T.  D.  2535. 

It  will  be  noted  that  the  rates  provided  in  the 
original  act  are  computed  upon  the  net  estate  of 
every  decedent  dying  on  and  after  September  9, 

1916,  to  and  including  March  2,  1917 ;  the  rates  pro- 
vided in  the  amendment  of  March  3,  1917,  apply  to 
the  net  estate  of  every  decedent  dying  on  and  after 
March  3,  1917,  to  and  including  October  3,  1917 ;  the 
rates  provided  in  the  amendment  of  October  3,  1917, 
apply  to  the  net  estate  of  every  decedent  dying  on 
and  after  October  4,  1917. 

The  amendment  of  October  3,  1917,  exempts  from 
the  additional  tax  imposed  by  Title  IX  of  this  act 
the  transfer  of  the  net  estate  of  any  decedent  dying 
while  serving  in  the  military  or  naval  forces  of  the 
United  States  during  the  continuance  of  the  war  in 
which  the  United  States  is  now  engaged  or  if  death 
results  from  injuries  received  or  disease  contracted 
in  such  service  within  one  year  after  the  termina- 
tion of  such  war.  It  will  be  noted,  however,  that 
this  exemption  does  not  affect  the  operation  of  the 
original  act  and  the  amendment  thereto  of  March  3, 

1917,  in  its  application  to  the  net  estates  of  the  de- 
cedents above  mentioned.  Therefore  the  net  estates 
of  the  military  and  naval  decedents  specified  above 
are  taxable  at  the  rates  imposed  in  the  March  3, 
1917,  act. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


TREASURY  DECISIONS.  293 

T.  D.  2570,  2626. 

(T.  D.  2570) 
Decisions  Under  War-Revenoe  Act. 

Synopsis  of  decisions  on  questions  relating  to  the  war-revenue 
act  of  October  3,  1917. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  I).  ( !.,  November  6,  1917. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
The  following  synopsis  of  decisions  of  the  Com- 
missioner of  Internal  Revenue  on  questions  relating 
to  the  war-revenue  act  of  October  3,  1917,  is  pub- 
lished for  the  information  of  revenue  officers  and 
others  concerned. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue 


Estate  Tax. 

Discount   allowed   on   original   payment   of    tax    not    allowed    on 
payment  of  additional  assessment. 


(T.  D.  2626) 

Estate  Tax — Act  of  September  8,  1916. 

Table  to  be  used  in  determining  the  value  of  one's  life  interest 
in  an  estate  vested  in  another. 


294  FEDERAL  ESTATE  TAX. 


T.  D.  2637. 


Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  December  6,  1917. 
To  collectors  of  internal  revenue  and  others  con- 
cerned : 
Title  II  of  the  act  of  September  8,  1916,  imposes 
a  tax  upon  the  transfer  of  the  net  estates  of  de- 
cedents.    In  determining  the  present  net  worth  of 
a  vested  estate  of  a  decedent  which  is  subject  to  the 
usufruct  or  life  interest  of  another  the  value  of  the 
life  interest  is  deductible.    In  arriving  at  the  value 
of  the  life  interest  the  following  table  should  be 
used. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 

(There  follows  a  table  for  computing  the  value 
of  a  life  interest.  It  is  similar  to  table  A  (p.  ), 
except  that  it  does  not  contain  column  4,  for  deter- 
mining the  value  of  the  reversion.) 


(T.  D.  2637) 
Estate  Tax. 

Condition  under  which  time  for  filing  estate-tax  returns  may  be 
extended  beyond  90  days  from  the  day  a  year  after  the  death  of 
the  decedent. 


TREASURY  DECISIONS.  295 

T.  D.  2637. 

Treasury  Department, 

Office  of  Commissioner  of  Internal  Revenue, 
Washington,  D.  C,  January  24,  1918. 
To  collectors  of  internal  revenue: 

It  has  been  found  in  numerous  cases  that,  at  the 
expiration  of  the  90-day  extension  granted  by  col- 
lectors for  the  filing  of  estate-tax  return,  the  con- 
dition of  the  estate  is  such  as  to  preclude  the  filing 
of  final  return  upon  which  the  exact  tax  due  can  be 
determined.  Accordingly,  Article  XXIX  of  regula- 
tions 37  is  amended  to  the  following  extent: 

Where  the  executor  has  requested  and  has  been 
granted  an  extension  of  not  to  exceed  90  days  for 
the  filing  of  estate-tax  return,  and  represents  to  the 
collector  that  complete  return  can  not  then  be  filed 
the  collector  upon  investigation,  and  if  he  is  satis- 
fied that  the  cause  for  further  delay  is  unavoidable, 
may  extend  the  time  for  filing  until  in  his  judgment 
the  reasonable  ground  for  delay  has  been  removed. 
In  every  such  case  it  should  be  pointed  out  to  the  ex- 
ecutor, that,  regardless  of  the  further  extension,  in- 
terest attaches  from  the  close  of  the  original  90-day 
extension  upon  all  the  unpaid  tax.  This  interest  is 
required  to  be  computed  from  the  day  of  the  de- 
cedent's death  and  is  at  the  rate  of  6  per  cent  per 
annum. 

Collectors  should  note  that  in  every  case  of  over- 
due estate  tax,  where  the  additional  extension  of 
time  herein  provided  for  has  not  been  granted,  the 
interest  rate  is  10  per  cent  instead  of  6  per  cent  per 


296  FEDERAL  ESTATE  TAX. 

T.  D.  2691. 

annum,  and  such  interest  is  also  computed  from  the 
day  of  the  decedent's  death. 

Where  either  an  original  90-day  extension  or  the 
additional  extension  herein  provided  for  is  granted 
the  collector  should  promptly  report  all  facts  to  this 
office.  Collectors  must  also  promptly  notify  this 
office  whenever  in  their  judgment  the  unavoidable 
cause  for  delay  in  filing  return  in  any  case  has  been 
removed. 

Previous  rulings  inconsistent  with  the  above  are 
modified  accordingly. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


(T.  D.  2691) 

Estate  Tax. 

Returns  on  Form  706  for  the  estates  of  nonresident  decedents 
to  be  forwarded  direct  to  the  Commissioner  of  Internal  Revenue 
for  transmittal  to  the  collector. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
Hereafter  returns  on  Form  706  for  the  estates 
of  nonresident   decedents   shall   be   forwarded    (in 


TREASURY  DECISIONS.  297 

T.  D.  2705. 

duplicate)  by  the  executor  direct  to  the  Com- 
missioner of  Internal  Revenue,  Treasury  Depart- 
ment, Washington,  D.  C,  who  will,  after  reviewing 
the  returns,  transmit  them  to  the  proper  collector. 
The  date  on  which  the  return  is  received  by  the 
Commissioner  of  Internal  Revenue  will  be  consid- 
ered the  date  of  original  filing  with  the  collector 
for  the  purpose  of  determining  whether  the  return 
is  filed  within  the  period  prescribed  by  law. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  April  8,  1918: 
L.  S.  Rowe, 

Aeting  Secretary  of  the  Treasury. 


(T.  D.  2705) 

Estate  Tax. 

United  States  bonds  bearing  interest  at  a  higher  rate  than  4 
per  cent  to  be  accepted  at  par  and  accrued  interest  in  payment  of 
estate  tax. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  internal-revenue  officers  and  others  concerned: 
Section  6  of  the  act  of  April  4,  1918  (Public  No. 
120,  65th  Cong.),  provided  in  part: 

Sec.  14.  That  any  bonds  of  the  United  States  bear- 
ing interest  at  a  higher  rate  than  four  per  centum 


298  FEDERAL  ESTATE  TAX. 

T.  D.  2705. 

(whether  issued  under  section  one  of  this  act,  or 
upon  conversion  of  bonds  issued  under  this  act  or 
under  said  act  approved  April  twenty-fourth,  nine- 
teen hundred  and  seventeen),  which  have  been 
owned  by  any  person  continuously  for  at  least  six 
months  prior  to  the  date  of  his  death,  and  which 
upon  such  date  constitute  part  of  his  estate,  shall, 
under  rules  and  regulations  prescribed  by  the  Sec- 
retary of  the  Treasury,  be  receivable  by  the  United 
States  at  par  and  accrued  interest  in  payment  of 
any  estate  or  inheritance  taxes  imposed  by  the 
United  States,  under  or  by  virtue  of  any  present  or 
future  law  upon  such  estate  or  the  inheritance 
thereof. 

Bonds  of  the  United  States  falling  within  the 
classification  specified  will  be  accepted  in  payment 
of  estate  tax  at  par  and  accrued  interest.  Bonds 
so  receivable  must  (1)  bear  a  higher  rate  of  interest 
than  4  per  cent  per  annum,  and  (2)  have  been  owned 
by  the  decedent  continuously  for  at  least  six  months 
prior  to  the  date  of  his  death,  and  upon  such  date 
constitute  a  part  of  the  estate  of  the  decedent.  The 
reckoning  of  the  required  period  of  ownership  may 
begin  on  the  date  when  the  decedent  acquired  bonds 
bearing  interest  at  a  higher  rate  than  4  per  cent,  by 
purchase,  by  conversion  of  other  bonds,  or  other- 
wise. 

The  entire  estate  tax  may  be  paid  in  bonds,  or 
the  tax  may  be  paid  partially  in  bonds  and  partially 
by  cash  or  check.    Collectors  may  not,  however,  ac- 


TREASURY  DECISIONS.  29  I 

T.  D.  2708. 

cept  bonds  the  par  value  and  accrued  Interest  on 
which  aggregates  a  greater  amount  than  the  tax. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 
Approved  April  23,  1918 : 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


(T.  D.  2708) 

Estate  Tax. 

Estates    of    nonresidents — Payment  of  tax  and  transfer  of  se- 
curities. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
T.  D.  2490  prescribes  a  method  to  be  followed  by 
transfer  agents  who  have  orders  for  the  transfer 
of  stock  standing  in  the  name  of  a  nonresident  de- 
cedent.     The    following    alternative    procedure    is 
established  for  observance  by  transfer  agents  who 
prefer  this  method  to  that  prescribed  in  T.  D.  2490 : 
A  supply  of  Form  706  will  be  furnished  by  the 
commissioner  or  any  collector  of  internal  revenue 
to  any  transfer  agent.    The  transfer  agent  will  for- 
ward forms  to  its  foreign  offices  or  to  its  represen- 
tatives in  foreign  countries,  with  instructions  that 
whenever  an  order  is  received  for  the  transfer  of 


300  FEDERAL  ESTATE  TAX. 

T.  D.  2708. 

securities  belonging  to  a  nonresident  decedent  the 
foreign  executor,  administrator,  or  beneficiary  of 
the  estate  will  be  required  to  execute  a  complete  re- 
turn on  Form  706  of  all  property  belonging  to  the 
decedent  situated  in  the  United  States,  including 
shares  of  stock  in  a  domestic  corporation.  This  re- 
turn, in  triplicate,  will  be  subscribed  and  sworn  to 
before  a  notary  public  or  a  similar  officer  qualified 
to  administer  oaths.  If  the  notary  public  or  other 
officer  is  known  to  the  transfer  agent  and  his  signa- 
ture is  guaranteed  by  the  transfer  agent,  the  au- 
thority of  the  notary  public  or  other  official  need  not 
be  attested  by  a  certificate  of  a  United  States  con- 
sul. In  addition  to  the  return,  the  foreign  repre- 
sentative of  the  transfer  agent  will  obtain  from  the 
personal  representative  of  the  estate  a  copy  of  the 
inventory  required  to  be  filed  by  the  probate  law  of 
the  country  in  which  the  decedent  was  domiciled  at 
the  time  of  death,  which  copy  shall  be  certified  to 
by  the  proper  foreign  judicial  officer  under  the  same 
conditions  provided  for  the  certification  of  the  re- 
turn. The  return  and  inventory  will  be  forwarded 
to  the  United  States  with  the  order  for  transfer  of 
the  shares  of  stock. 

Upon  receipt  of  the  return  and  inventory  by  the 
transfer  agent  the  items  on  the  return  will  be  care- 
fully checked  against  the  inventory.  The  transfer 
agent  will  retain  the  inventory  and  send  the  return, 
in  triplicate,  to  the  Commissioner  of  Internal  Reve- 
nue at  Washington,  with  a  certificate  to  the  effect 


TREASURY  DECISIONS.  301 

T.  D.  2708. 

that  all  property  disclosed  by  the  inventory  to  1)'' 
situated  in  the  United  States  has  been  included  in 
the  return  on  Form  706.  The  inventory  will  b<* 
furnished  for  inspection  by  the  Commissioner  of 
Internal  Revenue  in  any  case  where  the  commis- 
sioner so  desires. 

After  a  review  of  the  return  and  verification  of 
the  amount  of  tax  due,  two  copies  of  the  return  will 
be  forwarded  to  the  collector  to  whom  the  tax  must 
be  paid,  who  will  make  assessment,  and  upon  pay- 
ment of  the  tax  issue  the  usual  receipts  in  tripli- 
cate and,  in  addition,  will  certify  on  one  copy  of  the 
return  furnished  him  that  the  amount  of  tax  shown 
by  the  return  to  be  due  has  been  paid.  This  certi- 
fied and  receipted  copy  of  the  return  will  be  for- 
warded, with  the  usual  receipts  for  payment,  to  the 
transfer  agent,  to  be  used  as  evidence  that  the  se- 
curities listed  on  the  return  have  been  reported  to 
the  United  States  Government,  and  that  the  Federal 
estate  tax  has  been  paid  with  respect  to  all  property 
disclosed  on  Form  706. 

Notice  on  Form  704  and  Form  714  must  be  filed 
with  the  collector  as  heretofore. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  April  25,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 

20 


302  FEDERAL  ESTATE  TAX. 

T.  D.  2735. 

(T.   D.   2735) 
Estate  Tax. 

Real  estate  located  outside  of  the  United  States  belonging  to  a 
decedent  resident  within  the  United  States  should  not  be  included 
in  the  gross  estate  of  such  decedent  for  estate-tax  purposes. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
The  following  ruling  is  based  upon  an  opinion  of 
the  Attorney  General,  dated  May  14,  1918 : 

The  value  of  real  estate,  belonging  to  a  decedent 
resident  within  the  United  States  at  the  time  of  his 
death,  located  outside  of  the  United  States,  mean- 
ing thereby  the  States,  Territories  of  Alaska  and 
Hawaii,  and  the  District  of  Columbia,  should  not  be 
included  in  determining  the  value  of  the  gross  estate 
of  such  decedent  for  the  purposes  of  the  tax  im- 
posed by  Title  II  of  the  revenue  act  of  September 
8,  1916. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 
Approved  June  17,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


TREASURY  DECISIONS.  303 

T.  D.  2756. 

(T.   D.   275G) 
Estate  Tax. 

(1)  Conditions  under  which  5  per  cent  discount  may  be  allowed 
for  advance  payment  of  estate  tax;  (2)  conditions  under  which  a 
tentative  return  may  be  filed;  (3)  granting  of  extension  in  which 
to  file  final  return. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue. 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 

Five  Per  Cent  Discount. 
Section  204  of  the  estate-tax  law  (act  of  Sept.  8, 
1916)  provides  that  estate  tax  shall  be  due  one 
year  after  decedent's  death,  and  if  the  tax  is  paid 
before  it  is  due  a  discount  at  the  rate  of  5  per  cent 
per  annum,  calculated  from  the  time  payment  is 
made  to  the  date  when  the  tax  is  due,  shall  be  de- 
ducted. Discount  is  not  allowable  unless  the  total 
tax  be  determined  and  advance  payment  made  in 
full. 

It  is  not  contemplated  by  the  act  that  immediately 
after  a  decedent's  death,  or  at  any  time  before  the 
expiration  of  the  year,  the  executor  may  make  par- 
tial payment  on  account  of  the  tax  and  receive 
credit  for  the  discount  because  of  advance  payment. 
If  advance  payment  is  to  be  made  before  the  due 
date  of  the  tax,  the  estate  must  be  in  a  position  to 
file  a  final  return  on  Form  706  showing  the  value  of 
all  assets  as  of  the  date  of  decedent's  death  and  the 


304  FEDERAL  ESTATE  TAX. 

T.  D.  2756. 

allowable  deductions  to  which  the  estate  is  entitled 
under  section  203  of  the  act,  the  value  of  the  net 
estate,  and  the  determined  tax  because  of  the  trans- 
fer of  the  net  estate. 

Final  return  must  be  filed  wherever  advance  pay- 
ment is  desired  and  the  amount  paid  should  be  en- 
tered upon  the  collector's  assessment  list  for  the 
month  in  which  paid  as  advance  collection. 

Tentative  Return. 

Section  207  of  the  estate-tax  act  provides  that  if 
for  any  reason  the  amount  of  the  tax  can  not  be  de- 
termined the  payment  of  a  sum  of  money  sufficient 
in  the  opinion  of  the  collector  to  discharge  the  tax 
shall  be  deemed  payment  in  full  of  the  tax,  etc. 
This  provision  clearly  relates  to  the  time  when  the 
tax  is  due.  The  collector  is  not  required  to  exercise 
his  discretion  as  to  what  amount  will  satisfy  the  tax 
until  the  due  date  thereof.  It  is  obvious  that  no  dis- 
count is  allowable  upon  such  payment,  as  neces- 
sarily the  payment  can  not  be  made  before  the  ex- 
piration of  a  year  following  decedent's  death. 

The  following  regulations  govern  the  above  pay- 
ments : 

If  at  the  end  of  the  year  following  decedent's 
death  the  executor  represents  and  the  collector  is 
satisfied  that  the  amount  of  tax  upon  the  estate  can 
not  be  determined,  a  return  may  be  filed  by  the  ex- 
ecutor setting  forth  the  then  known  assets  of  the 
estate  and  the  actual  value  thereof  as  of  date  of  de- 


TREASURY  DECISIONS.  305 

T.  D.  2756. 

cedent's  death,  the  determined  and  allowable  deduc- 
tions to  which  the  estate  is  entitled,  the  value  of  the 
net  estate  thus  disclosed,  and  the  tax  due  thereon. 
This  return  will  be  designated  "tentative."  The 
tax  shown  to  be  due  upon  the  tentative  return  should 
be  paid  and  entered  upon  the  collector's  assess- 
ment list  for  the  month  in  which  paid. 

As  further  provided  in  section  207  of  the  act,  if 
the  amount  of  tax  as  finally  determined  is  less  than 
the  amount  paid  upon  the  basis  of  the  tentative  re- 
turn the  commissioner  will,  upon  filing  claim  on 
Form  46,  make  refund  of  the  excess  payment.  If 
the  amount  of  tax  as  finally  determined  exceeds  the 
amount  so  paid  the  commissioner  will  notify  the  ex- 
ecutor of  such  excess.  From  the  time  of  such  noti- 
fication to  the  time  of  final  payment  of  such  excess 
part  of  the  tax  interest  will  be  added  thereto  at  the 
rate  of  10  per  cent  per  annum. 

Extension  for  Filing  Final  Return. 

At  the  time  the  "tentative"  return  is  filed  an  ex- 
tension not  to  exceed  90  days  may  be  granted  by 
the  collector  in  which  to  file  a  final  return.  If  at 
the  expiration  of  the  extension  granted  the  execu- 
tor represents  that  he  is  still  unable  to  determine 
the  tax  and  file  final  return,  a  detailed  statement  as 
to  the  reasons  preventing  the  determination  of  the 
tax  should  be  transmitted  to  the  bureau  for  con- 
sideration as  to  whether  an  additional  extension 
should  be  granted. 


306  FEDERAL  ESTATE  TAX. 

T.  D.  2770. 

In  every  case  where  a  tentative  return  is  filed  it 
should  be  plainly  so  designated,  and  a  duplicate 
thereof  transmitted  to  the  bureau  with  a  statement 
by  the  collector  as  to  the  period  of  extension 
granted. 

All  regulations  and  Treasury  decisions  incon- 
sistent with  the  ruling  contained  herein  are  hereby 
modified. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  September  5,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


(T.  D.  2770) 

Estate  Tax. 

The  time  of  notification  to  an  executor  of  the  amount  of  "  ex- 
cess' '  estate  tax  due  is  the  date  on  which  notice  thereof  is  received 
by  the  executor. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue. 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
Section  207  of  the  estate-tax  law,  Title  II,  of  the 
act  of  September  8,  1916,  provides  in  part  as  fol- 
lows : 

That  the  executor  shall  pay  the  tax  to  the  col- 
lector or  deputy  collector.  If  for  any  reason  the 
amount  of  the  tax  can  not  be  determined,  the  pay- 


TREASURY  DECISIONS.  307 

T.  D.  2770. 

mont  of  a  sum  of  money  sufficient,  in  the  opinion  of 
the  collector,  to  discharge  the  tax  shall  be  deemed 
payment  in  full  of  the  tax,  except  as  in  this  section 
otherwise  provided.  If  the  amount  so  paid  exceeds 
the  amount  of  the  tax  as  finally  determined,  the 
Commissioner  of  Internal  Revenue  shall  refund 
such  excess  to  the  executor.  If  the  amount  of  the 
tax  as  finally  determined  exceeds  the  amount  so 
paid  the  commissioner  shall  notify  the  executor  of 
the  amount  of  such  excess.  From  the  time  of  such 
notification  to  the  time  of  the  final  payment  of  such 
excess  part  of  the  tax,  interest  shall  be  added  thereto 
at  the  rate  of  10  per  centum  per  annum,  and  the 
amount  of  such  excess  shall  be  a  lien  upon  the  en- 
tire gross  estate,  except  such  part  thereof  as  may 
have  been  sold  to  a  bona  fide  purchaser  for  a  fair 
consideration  in  money  or  money '^s  worth. 

The  question  has  arisen  under  this  section  as  to 
what  is  the  "time  of  such  notification"  from  which 
interest  is  to  be  computed.  The  "time  of  such  no- 
tification" is  the  date  on  which  notice  of  the  amount 
of  such  "excess  part  of  the  tax"  is  received  by  the 
executor,  whether  such  notice  is  given  by  mail  or 
otherwise. 

All  regulations  and  rulings  inconsistent  herewith 
are  modified  accordingly. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  November  6,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


308  FEDERAL  ESTATE  TAX. 

T.  D.  2771. 

(T.  D.  2771) 
Estate  Tax. 

Conditions  under  which  taxes  on  real  and  personal  property  and 
on  income  are  deductible  in  computing  the  net  estate  of  a  decedent 
for  purposes  of  taxation  under  Title  II  of  the  act  of  September 
8,   1916. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue. 

Washington,  D.  C. 
To  collectors  of  internal  revenue,  internal- revenue 
agents,  and  others  concerned: 
The  estate-tax  law  (act  of  Sept.  8,  1916,  sec.  203 
[a]  1)  permits  the  deduction  of  "administration 
expenses,"  "claims  against  the  estate,"  and 
"charges  against  the  estate,"  in  determining  the 
value  of  the  net  estate.  Where  the  State  statute 
makes  the  tax  a  lien  against  property  it  is  deduct- 
ible as  a  "charge  against  the  estate,"  where  it  is  a 
personal  obligation  of  the  taxpayer  it  is  deductible 
as  a  "claim  against  the  estate."  Taxes  are  never 
deductible  as  "administration  expenses." 

In  certain  jurisdictions  taxes  upon  both  real  and 
personal  property  are  assessed  prior  to  the  expira- 
tion of  the  period  for  which  the  tax  is  laid ;  payment 
is  not  required  until  a  date  subsequent  to  the  assess- 
ment; and  the  tax  liability  is  created  as  of  a  date 
prior  to  the  performance  by  the  tax  officers  of  all  of 
their  duties,  such  as  determining  the  exact  amount  to 
be  assessed  to  the  taxpayer,  and  giving  him  notice  of 
the  tax.  The  rule  for  determining  deductibility,  in 
these  and  other  cases,  is  as  follows :    If  the  tax  lia- 


TREASURY  DECISIONS.  309 

T.  D.  2771. 

bility  is  created  as  of  a  date  in  the  lifetime  of  the 
decedent,  the  whole  tax  is  deductible,  although  the 
entire  period  for  which  the  tax  is  laid  has  not 
elapsed,  its  exact  amount  is  not  then  ascertainable, 
and  payment  is  not  required  until  a  later  date.  On 
the  other  hand,  if  the  tax  liability  is  created  as  of 
a  date  subsequent  to  the  decedent's  death,  no  part 
of  it  is  deductible,  although  part  of  the  period  for 
which  the  tax  is  laid  elapsed  in  the  decedent's  life- 
time. 

The  foregoing  rules  also  apply  to  taxes  on  in- 
come, whether  imposed  by  State  statute  or  act  of 
Congress.  Where  the  statute  creates  either  a  lien 
or  personal  obligation,  as  of  a  date  in  the  decedent's 
lifetime,  the  tax  is  deductible.  Where  the  lien  or 
obligation  is  created  as  of  a  date  subsequent  to  the 
decedent's  death,  the  tax  is  not  deductible. 

The  income  and  excess  profits  taxes  imposed  by 
the  acts  of  September  8,  1916,  and  October  3,  1917, 
constitute  personal  obligations  of  the  taxpayer,  and 
are  deductible  in  accordance  with  these  rules.  All 
unpaid  taxes  for  years  prior  to  that  in  which  the  de- 
cedent died  are  deductible.  For  the  year  in  which 
the  decedent  died,  the  tax  upon  income  up  to  the 
date  of  death  is  deductible. 

Daniel  C.     Roper, 
Commissioner  of  Internal  Revenue. 
Approved  November  8,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


310  FEDERAL  ESTATE  TAX. 

T.  D.  2772. 

(T.  D.  2772) 
Estate  Tax. 

Securities  such  as  shares  of  stock  in  domestic  corporations  which 
are  property  within  the  United  States  within  the  meaning  of  sec- 
tion 202,  Title  II,  of  the  act  of  September  8,  1916,  belonging  to  a 
nonresident  decedent  and  deposited  with  the  British  Treasury,  for 
which  certificates  of  deposit  were  issued,  are  subject  to  estate  tax 
on  the  death  of  such  nonresident  decedent  if  the  certificates  have 
not  previously  been  transferred. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue,  internal-revenue 
agents,  and  others  concerned: 
Estate  tax  is  imposed  by  Title  II  of  the  act  of 
September  8,  1916,  upon  all  property  of  a  nonresi- 
dent decedent  situated  in  the  United  States.  (See 
sees.  201,  202,  203,  205.)  Section  202  provides  that 
"for  the  purposes  of  this  title,  stock  in  a  domestic 
corporation  owned  and  held  by  a  nonresident  de- 
cedent shall  be  deemed  property  within  the  United 
States."  The  question  has  been  considered  whether, 
if  such  stock  in  a  domestic  corporation  or  other  se- 
curity, which  if  owned  by  a  nonresident  decedent 
would  be  property  within  the  United  States,  is  de- 
posited with  the  British  Treasury  and  a  certificate 
of  deposit  is  issued  therefor,  such  stock  or  other 
property  is  upon  the  death  of  the  certificate  holder 
a  part  of  his  gross  estate  and  subject  to  estate  tax. 

The  holder  of  the  certificate  of  deposit  is  the  bene- 
ficial   owner   of   the   stock   or   other   property   for 


TREASURY  DECISIONS.  311 

T.  D.  2772. 

which  such  certificate  is  issued.  The  relation  of  the 
British  Government  to  a  certificate  holder  is  sub- 
stantially, if  not  technically,  that  of  a  trustee  to  a 
beneficiary.  Upon  the  death  of  the  beneficiary  of  a 
trust  a  transfer  subject  to  estate  tax  takes  place 
with  reference  to  property  within  the  United  States 
held  upon  trust  for  such  beneficiary.  This  is  true 
even  though  the  equitable  title  to  such  stock  passes 
without  the  recording  of  the  transfer  upon  the  books 
of  the  corporation.  For  the  purpose  of  the  estate 
tax,  no  distinction  is  to  be  taken  between  the  rights 
of  a  deceased  certificate  holder  and  the  rights  of  a 
deceased  beneficiary  of  a  trust  of  which  an  indi- 
vidual or  corporation  is  trustee. 

It  is  held,  therefore,  that  securities  such  as  shares 
of  stock  in  domestic  corporations  which  are  prop- 
erty within  the  United  States  within  the  meaning 
of  Title  II  of  the  act  of  September  8, 1916,  deposited 
by  an  individual  not  resident  within  the  United 
States  with  the  British  Treasury,  and  for  which  cer- 
tificates of  deposit  were  issued,  are  at  the  death  of 
such  nonresident,  if  such  certificates  have  not  been 
transferred,  a  part  of  his  gross  estate  and  subject 
to  estate  tax. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  November  8,  1918: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


312  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

(T.   D.  2802) 
Estate  Tax. 

Receipt  of  Liberty  bonds  for  estate  or  inheritance  taxes. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 

The  appended  department  Circular  No.  132,  is- 
sued under  date  of  January  30,  1919,  with  reference 
to  the  receipt  of  Liberty  bonds  in  payment  of  estate 
or  inheritance  taxes,  is  published  for  the  informa- 
tion of  internal-revenue  officers  and  others  con- 
cerned. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  March  12,  1919: 
Carter  Glass, 

Secretary  of  the  Treasury. 

(1)  The  following  regulations  are  prescribed 
pursuant  to  section  14  of  the  second  Liberty  bond 
act,  approved  September  24,  1917,  as  amended  by 
third  Liberty  bond  act,  approved  April  4,  1918, 
which  section,  as  so  amended,  reads  as  follows: 

Sec.  14.  That  any  bonds  of  the  United  States 
bearing  interest  at  a  higher  rate  than  four  per 
centum  per  annum  (whether  issued  under  section 
one  of  this  Act  or  upon  conversion  of  bonds  issued 
under  this  Act  or  under  said  Act  approved  April 
twenty-fourth,    nineteen    hundred    and    seventeen), 


TREASURY  DECISIONS.  813 

T.  D.  2802. 

which  have  been  owned  by  any  person  continuously 
for  at  least  six  months  prior  to  the  date  of  his  death, 
and  which  upon  such  date  constitute  part  of  his 
estate,  shall  under  rules  and  regulations  prescribed 
by  the  Secretary  of  the  Treasury,  be  receivable  by 
the  United  States  at  par  and  accrued  interest  in  pay- 
ment of  any  estate  or  inheritance  taxes  imposed  by 
the  United  States,  under  or  by  virtue  of  any  pres- 
ent or  future  law  upon  such  estate  or  the  inheri- 
tance thereof. 

(2)  The  bonds  described  in  said  section  at  present 
issued  and  outstanding  are : 

(a)  First  Liberty  loan  converted  414  per  cent 
bonds  of  1932-47,  dated  May  9, 1918. 

(b)  First  Liberty  loan  second  converted  414  per 
cent  bonds  of  1932-47,  dated  October  24, 1918.  (These 
bonds  are,  of  course,  not  yet  receivable  in  payment 
of  taxes.) 

(c)  Second  Liberty  loan  converted  4%  per  cent 
bonds  of  1927-42,  dated  May  9,  1918. 

(d)  Third  Liberty  loan  414  per  cent  bonds  of 
1928,  dated  May  9,  1918. 

(e)  Fourth  Liberty  loan  414  per  cent  bonds  of 
1933-38,  dated  October  24,  1918.  (These  bonds  are, 
of  course,  not  yet  receivable  in  payment  of  taxes.) 

(3)  Bonds  of  the  issues  above  described  are  re- 
ceivable for  such  taxes  only  in  case  such  bonds  have 
been  owned  by  the  decedent  continuously  for  at 
least  six  months  prior  to  the  date  of  his  death  and 
upon  such  date  constitute  part  of  his  estate.     The 


314  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

reckoning  of  the  required  period  of  ownership  will 
begin  on  the  date  when  the  decedent  acquired  such 
bonds  by  original  subscription,  by  purchase,  by  con- 
version of  bonds  of  other  issues,  or  otherwise.  In 
the  case  of  acquisition  of  bonds  by  conversion  of 
bonds  of  other  issues  previously  owned,  the  date 
of  presentation  for  conversion  to  the  Treasury  De- 
partment or  a  Federal  reserve  bank  will  be  deemed 
the  date  of  acquisition.  Exchange  of  coupon  for 
registered  bonds,  or  registered  for  coupon  bonds,  or 
of  bonds  of  one  denomination  for  bonds  of  other 
denominations  of  the  same  issue,  within  six  months 
prior  to  the  date  of  death  of  the  decedent,  will  not 
prevent  the  receipt  of  such  bonds  for  estate  or  in- 
heritance taxes,  provided  that  no  change  of  owner- 
ship takes  place. 

(4)  Bonds  tendered  for  payment  of  taxes  pursu- 
ant to  this  regulation  must  be  accompanied  by  an 
affidavit  of  one  or  more  of  the  legal  representatives 
of  the  estate  on  Form  760  hereto  attached,  and  the 
collector  is  authorized  to  require  such  further  evi- 
dence as  may  be  necessary  to  enable  him  to  deter- 
mine that  the  bond  or  bonds  are  properly  receivable 
in  payment  of  estate  or  inheritance  taxes  pursuant 
to  law  and  these  regulations. 

(5)  On  receipt  of  such  bonds,  and  on  making 
such  determination,  and  provided  that  the  bonds 
tendered  conform  to  the  other  provisions  of  these 
regulations,  the  collector  shall  stamp  or  plainly 
write  upon  the  face  of  each  bond,  the  following: 


TREASURY  DECISIONS.  315 

T.  D.  2802. 

(Date) This  bond  has  this  day  been 

received  in  payment  of  estate  (or  inheritance) 
taxes  on  the  estate  of  ....  (Name  of  decedent) .... 
under  authority  of  law,  and  the  same  will  not  be 
redeemed  by  the  United  States  except  for  credit  of 

the  undersigned Collector  of  Internal 

Revenue  for  the  District  of 

and  shall  duly  sign  the  same.  Coupons,  if  any, 
attached  to  each  bond,  shall  be  stamped  or  marked 
"paid"  on  the  face  of  each  coupon  in  letters  of  suffi- 
cient size  to  be  plainly  legible. 

(6)  The  entire  tax  may  be  paid  in  bonds,  or  the 
tax  may  be  paid  partly  in  bonds,  and  partly  by  any 
other  form  of  payment  permitted  by  law  or  regula- 
tions duly  in  force.  Collectors  may  not,  however, 
receive  bonds,  the  par  value  and  accrued  interest  of 
which,  computed  in  accordance  with  these  regula- 
tions, aggregate  a  greater  amount  than  the  tax  in 
payment  of  which  the  bonds  are  tendered. 

COUPON  BONDS. 

(7)  Coupon  bonds  received  for  such  taxes  must 
be  delivered  to  the  collector  with  all  unmatured 
coupons  attached  and  with  all  matured  coupons  de- 
tached. Detached  matured  coupons  will  not  be  re- 
ceivable in  payment  of  estate  or  inheritance  taxes. 
The  portion  of  the  face  amount  of  the  current 
coupon  which  represents  accrued  interest  to  date  of 
receipt  for  taxes  will  be  determined  in  the  manner 
prescribed  by  the  interest  table  (b)  hereto  attached, 


316  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

and  such  accrued   interest  will   be   receivable   for 
estate  or  inheritance  taxes. 

(8)  Coupon  bonds,  after  being  received,  and 
reception  noted  on  the  bonds,  as  above  required, 
will  be  deposited  by  the  collector  in  the  Federal 
reserve  bank  of  the  district  in  which  his  office  is 
located  as  a  deposit  of  the  par  value  with  accrued 
interest,  determined  as  above  required.  Such  bonds 
must  be  transmitted  by  registered  mail  but  will  not 
be  insured.  The  collector  will  transmit  with  the 
bonds  an  accurate  schedule  on  Form  761  hereto 
attached,  showing  the  serial  number  and  denomina- 
tion of  each  bond  transmitted,  the  issue,  the  date  of 
issue,  the  face  value  and  date  of  receipt  for  taxes, 
the  amount  of  accrued  interest  and  the  amount  for 
which  credited  against  estate  or  inheritance  taxes. 
Such  schedule  shall  be  made  in  quadruplicate,  the 
original  to  accompany  the  bonds  deposited  with  the 
Federal  reserve  bank,  the  duplicate  to  be  trans- 
mitted to  such  Federal  reserve  bank  under  separate 
cover,  the  triplicate  to  be  transmitted  to  the  Secre- 
tary of  the  Treasury,  Division  of  Loans  and  Cur- 
rency, Washington,  and  the  remaining  copy  to  be 
retained  by  the  collector. 

(9)  A  Federal  reserve  bank  on  receipt  and  ex- 
amination of  such  bonds  will  charge  the  Treasurer's 
account  with  par  and  accrued  interest  to  date  of 
receipt  for  taxes  as  reported  by  the  collector,  give 
credit  to  the  collector  for  like  amount,  and  will  issue 
a  certificate   of   deposit  in   triplicate   on   National 


TREASURY  DECISIONS.  317 

T.  D.  2802. 

Bank  Form  15,  and  transmit  the  original  to  the 
Secretary  of  the  Treasury  through  the  Treasurer 
of  the  United  States  with  its  transcript,  and  the 
duplicate  and  triplicate  to  the  collector,  who  will 
forward  the  duplicate  to  the  Commissioner  of  In- 
ternal Revenue.  Such  Federal  reserve  bank  will 
then  physically  cancel  the  bonds  and  coupons 
attached,  and  transmit  the  same  to  the  Treasurer 
of  the  United  States  with  the  original  or  duplicate 
of  the  collector's  schedule  (Form  761),  to  which 
shall  be  added  the  Federal  reserve  bank's  certificate 
as  shown  thereon. 

REGISTERED   BONDS. 

(10)  Registered  bonds  are  also  receivable  for 
estate  or  inheritance  taxes  in  accordance  with  these 
regulations.  In  addition  to  requiring  the  affidavit 
(Form  760)  the  collector  shall  determine  that  the 
registered  owner  whose  name  is  inscribed  on  the 
bond  is  identical  with  the  decedent  whose  estate  is 
liable  to  estate  (or  inheritance)  taxes  and  that  the 
bond  is  presented  from  the  custody  or  control  of  the 
legal  representative  or  representatives  of  such 
estate.  Such  bond  shall  be  assigned  to  "the  Secre- 
tary of  the  Treasury  for  redemption  in  payment  of 
estate  (or  inheritance)  taxes"  by  the  authorized 
representative  or  representatives  of  the  deceased 
registered  owner.  Such  representative  or  repre- 
sentatives must  furnish  to  the  collector  a  certificate 
under  the  seal  of  the  court  in  which  the  estate  is 


318  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

being  administered  or  a  duly  authenticated  copy  of 
the  letters  testamentary  or  of  administration,  show- 
ing the  appointment  of  such  representative  or  rep- 
resentatives, and  the  date  thereof.    Such  certificate 
must  be  dated  within  30  days  prior  to  its  presenta- 
tion   to    the    collector.      If    the    representative    be 
appointed  to  execute  a  will,  a  certified  copy  of  the 
will  must  be  furnished  to  the  collector.     All  such 
documents  of  authority  mil  be  attached  to  the  bond 
and  forwarded  therewith  by  the  collector  as  herein- 
after provided.    Where  there  are  two  or  more  legal 
representatives,  all  must  unite  in  an  assignment, 
unless  by  decree  of  court  or  testamentary  provision 
some  one  or  more  of  them  is  or  are  designated  or 
empowered   to   dispose   of  the   bonds.     The   form 
printed  on  the  back  of  the  bond  must  be  used  for 
assignment,  and  the  assignment  must  be  dated  and 
properly  acknowledged,  as  prescribed  in  the  note 
printed  on  the  back  of  the  bond.    Officers  authorized 
to  take  acknowledgments  of  assignments  of  regis- 
tered bonds  in  addition  to  those  mentioned  on  the 
back  of  the  bond  are  designated  in  the  regulations 
of  the  Treasury  Department  in  relation  to  United 
States  bonds.     The   collector  will   satisfy  himself 
that   the  above-mentioned  documents   of  authority 
and  the  requisite  signatures  and  acknowledgments 
are  in  hand  before  noting  on  the  bond  its  reception 
for  taxes,  as  provided  in  paragraph  5  hereof,  but 
the  final  determination  of  the  correctness  or  validity 
of  the  assignment  will  be  made  by  the  Secretary  of 


TREASURY  DECISIONS.  319 

T.  D.  2802. 

the  Treasury,  Division  of  Loans  and  ( 'urrency,  at 
Washington,  on  receipt  of  all  such  bonds  and  docu- 
ments, when  transmitted  as  hereinafter  provided. 

(11)  By  reason  of  the  periodical  closing  of  the 
transfer  books  of  the  Treasury  Department  for  the 
payment  of  interest  on  registered  bonds,  and  the 
impossibility  of  stopping  payment  of  interest  to 
the  registered  holder  during  the  period  of  such 
dosing,  registered  bonds  will  not  be  receivable  in 
payment  of  estate  or  inheritance  taxes  during  the 
period  of  closing  of  the  books  of  the  issue  in  ques- 
tion. The  books  are  closed  with  respect  to  each 
issue  for  one  month  prior  to  each  interest  date.  The 
closed  periods  with  respect  to  each  bond  may  there- 
fore be  determined  by  inspection  of  the  bond  itself, 
being  one  month  prior  to  each  interest  payment  date 
named  thereon,  and  until  the  day  following  such 
interest  payment  date.  The  closed  periods  for  each 
issue  of  bonds  receivable  for  estate  or  inheritance 
taxes  are  also  stated  in  table  {d)  hereto  attached. 

(12)  Collectors  will  examine  each  registered  bond 
tendered  for  estate  or  inheritance  taxes  to  deter- 
mine whether  the  transfer  books  of  the  issue  in 
question  arc  then  opened  or  closed.  If  the  books 
are  then  open  but  are  due  to  close  on  a  date  too 
early  to  permit  the  bond  to  be  transmitted  to  the 
Secretary  of  the  Treasury,  Division  of  Loans  and 
Currency,  and  to  be  received  by  such  division  prior 
to  the  closing  date,  the  collector  will  advise  the 
Secretary  of  the  Treasury,  Division  of  Loans  and 


320  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

Currency,  by  telegraph  at  the  time  of  receipt  of  the 
bond,  using  Form  (e)  hereto  attached,  and  will  im- 
mediately confirm  the  same  by  mail.  The  Division 
of  Loans  and  Currency  will  thereupon  stop  interest 
payment  on  such  bond.  The  Secretary  reserves  the 
right  (a)  to  refuse  to  receive  in  payment  of  estate 
or  inheritance  taxes  any  registered  bond  tendered 
to  the  collector  during  an  open  period  but  received 
at  the  Division  of  Loans  and  Currency  during  a 
closed  period  of  the  transfer  books  of  the  issue  in 
question,  unless  the  current  payment  of  interest  on 
such  bond  has  been  stopped,  (b)  to  adjust  the  value 
at  which  such  bond  will  be  received  in  payment  of 
estate  or  inheritance  taxes  at  the  equivalent  of  par 
and  accrued  interest  on  the  date  on  which  such  bond 
was  properly  tendered  to  the  collector. 

(13)  Registered  bonds  receivable  in  accordance 
with  these  regulations  will  be  received  at  par  and 
accrued  interest,  computed  from  the  last  preceding 
interest  date  as  shown  thereon,  to  the  date  of  re- 
ceipt, in  accordance  with  Table  {b)  hereto  attached. 

(14)  Registered  bonds  when  so  received,  and 
bearing  the  stamp  or  writing  required  by  para- 
graph 5  hereof,  will  be  transmitted  with  all  accom- 
panying documents  of  authority  to  the  Secretary  of 
the  Treasury,  Division  of  Loans  and  Currency, 
Washington,  by  registered  mail,  but  not  insured. 
The  collector  will  make  an  accurate  schedule  on 
Form  762  hereto  attached  in  triplicate  showing  the 
date  of  death  of  the  decedent,  the  serial  number 


TREASURY  DECISIONS.  321 

T.  D.  2802. 

and  denomination  of  each  bond,  the  issue,  the  date 
of  issue,  the  face  value,  the  date  of  receipt  for  taxes, 
and  the  amount  for  which  credited  against  estate 
or  inheritance  taxes.  The  original  of  this  schedule 
must  accompany  the  bonds  sent  to  the  Secretary  of 
the  Treasury,  Division  of  Loans  and  Currency ;  the 
duplicate  shall  be  transmitted  to  the  Secretary  of 
the  Treasury,  Division  of  Loans  and  Currency, 
under  separate  cover;  and  the  triplicate  shall  be 
retained  by  the  collector. 

(15)  On  receipt  of  such  bonds,  the  Division  of 
Loans  and  Currency  will  determine  whether  the 
assignment  has  been  properly  executed,  whether 
the  bonds  are  of  an  issue  receivable  for  estate  or 
inheritance  taxes  hereunder,  whether  the  depart- 
ment's record  of  registration  is  consistent  with  the 
affidavit  of  ownership  (Form  760),  and  the  amount 
at  which  such  bonds  are  receivable  for  estate  or 
inheritance  taxes,  and  will,  if  it  find  the  bonds  in 
order,  transmit  them  with  its  advice  on  Form  L. 
and  C.  122  to  the  Treasurer  of  the  United  States  for 
redemption.  The  Treasurer  will  thereupon  cancel 
the  bonds  and  issue  a  certificate  of  deposit  in  the 
name  of  the  collector,  in  triplicate,  and  will  forward 
the  original  to  the  office  of  the  Secretary  of  the 
Treasury,  Division  of  Public  Moneys,  and  transmit 
the  duplicate  and  triplicate  of  such  certificate  to  the 
Commissioner  of  Internal  Revenue,  Accounts  Divi- 
sion, who  will  forward  the  triplicate  to  the  collector. 


322  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

GENERAL. 

(16)  Until  certificates  of  deposit  are  received  by 
the  collector,  the  amounts  of  bonds  deposited  must 
be  carried  as  "Cash  on  hand,"  and  not  credited  as 
"Collections,"  as  the  dates  of  the  certificates  of 
deposit  determine  the  dates  of  collections. 

(17)  The  right  is  reserved  to  amend  or  withdraw 
the  foregoing  regulations  in  whole  or  in  part  at  any 
time. 

Carter  Glass,  Secretary  of  the  Treasury. 


Treasury  Department, 

internal  revenue. 

Form  760. 

Affidavit  of  Ownership  of  Bonds. 

State  of ,  County  of ,  ss.: 

We  (I),   the  undersigned  execut. . . ., 

administrat . . . ,   beneficiar .  . . ,   legal   representative 

of  the  estate  of ,  deceased,  who  died  on 

,  19 .... ,  do  severally  swear  that  the 

bond. .  described  below  bearing  interest  at  a  higher 
rate  than  4  per  centum  per  annum  was  (or  were) 
each  owned  by  the  decedent  continuously  for  at 
least  six  months  prior  to  the  date  of  his  (or  her) 
death  and  upon  such  date  constituted  part  of  his 
(or  her)  estate,  and  that  the  following  statements 
with  respect  to  each  such  bond  are  true  to  the 
knowledge  of  deponent,  to  wit : 


TREASURY  DECISIONS. 


323 


T.  D.  2802. 


Serial 
No. 

Description 

of 

issue. 

Date 

of 
issue. 

Date 

of 

maturity. 

Date  of 

acquisition 

by 
decedent. 

Face 
value. 

Coupon 
or  regis- 
tered. 

(Each  bond  must  be  entered  separately.) 


(Address  for  mail.) 


Subscribed  and  sworn  to  before  me  at. 
this day  of ,  19 


Notary  Public,  Deputy  Collector. 


324  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

Table  (b). 

Treasury  Department, 

division  of  loans  and  currency, 

Form  L.  &  C.  90. 

(Ed.  50,000— Sept.  16,  1918.) 

Liberty  Loan 

Interest  Table  for  4*4  Per  Cent  Bonds. 

Interest  on  $100  at  4*4  per  cent  per  annum,  payable 

semiannually  (2ys  per  cent  per  half  year). 

[Tables  prepared  by  Government  actuary.] 
Note. — Interest  on  United  States  bonds  is  com- 
puted on  actual  days  basis  within  the  interest 
period.  For  any  given  interest  computation  the 
appropriate  column  to  be  used  may  be  determined 
from  the  following: 

NUMBER  OF  DAYS  IN  EACH  HALF  YEAR. 

Half  year  ending  the  15th  day  of — 


Kegular  years —       Days 
March,  May,  July, 

August 181 

April,  June 182 

October,  December  183 
January,     Febru- 
ary, September, 
November 184 


Leap  years —  Days 

March,  May,  July, 

August 182 

April,  June,  Octo- 
ber, December  .   183 
January,      Febru- 
ary, September, 
November 184 


TREASURY  DECISIONS. 


325 


T.  D.  2802. 


Days. 

Half  year  of 
181  "days. 

Half  year  of 
182  days. 

Half  vear  of 
183  days. 

Half  vear  of 
184  days. 

1 

$0.01774033 
.02348066 
.03522099 
.04696133 
.05870166 

.07044199 
.08218232 
.09392265 
. 10566298 
.11740331 

. 12914365 
. 14088398 
. 15262431 
. 16436464 
. 17610497 

. 18784530 
. 19958564 
.21132597 
. 22306630 
.23480663 

.24654696 
.25828729 
. 27002762 
.28176796 
.29350829 

.30524862 
.31698895 
.32872928 
. 34046961 
.35220994 

.36395028 
.37569061 
.38743094 
.39917127 
.41091160 

$0.01167582 
.02335165 
.03502747 
. 04670330 
.05837912 

.07005495 
.08173077 
.09340659 
. 10508242 
.11675824 

. 12843407 
.14010989 
.15178571 
. 16346154 
.17513736 

18681319 
. 19848901 
.21016484 
.22184066 
.23351648 

.24519231 
.25686813 
.26854396 
.28021978 
.29189560 

.30357143 
.31524725 
. 32692308 
. 33859S90 
.35027473 

.36195055 
.37362637 
.38530220 
.39697802 
. 40865385 

$0  01161202 
. 02322404 
.03483607 
. 04644809 
.05806011 

.06967213 
.08128415 
.09289617 
. 10450820 
.11612022 

. 12773224 
. 13934426 
. 15095628 
.16256831 
.17418033 

. 18579235 
. 19740437 
.20901639 
.22062842 
.23224044 

.24385246 
.25546448 
.26707650 
. 27868852 
.29030055 

.30191257 
.31352459 
.32513661 
.33674863 
.34836066 

.35997268 
.37158470 
.38319672 
.39480874 
.40642077 

$0.01154891 

2 

. 02309783 

3 

03464674 

4 

.04619565 

a 

.05774457 

6 

.06929318 

7 

.08084239 

8 

.09239130 

9 

. 10394022 

10 

.11548913 

11 

. 12703804 

12 

. 13858696 

13 

. 15013587 

14 

. 16168478 

15 

.17323370 

16  

. 18478261 

17 

. 19633152 

18 

.20788043 

19 

.21942935 

20... 

.23097826 

21 

.24252717 

22 

. 25407609 

23 

.26562500 

24 

.27717391 

25 

. 28872283 

26 

.30027174 

27 

.31182065 

28 

. 32336957 

29  . 

.33491848 

30 

.34646739 

31 

.35801630 

32 

. 36956522 

33 

.38111413 

34 

.39266304 

35 

.40421196 

326 


FEDERAL  ESTATE  TAX. 


T.  D.  2802. 


Days. 

Half  year  of 
181  days. 

Half  year  of 
182  days. 

Half  year  of 
183  days. 

Half  year  of 
184  days. 

36 

37 

38 

$ . 42265193 
.43439227 
.44613260 
.45787293 
.46961326 

.48135359 
.49309392 
.50483425 
.51657459 
.52831492 

. 54005525 
.55179558 
.56353591 
. 57527624 
. 58701657 

.59875691 
.61049724 
.62223757 
.63397790 
.64571823 

.65745856 
.66919889 
.68093923 
.69267956 
. 70441989 

.71616022 
. 72790055 
. 73964088 
.75138122 
.76312155 

.77486188 
.78660221 
. 79834254 
.81008287 
.82182320 

$.42032967 
.43200549 
.44368132 
.45535714 
.46703297 

. 47870879 
.49038462 
. 50206044 
.51373626 
. 52541209 

.53708791 
.54876374 
. 56043956 
.57211538 
.58379121 

. 59546703 
.60714286 
.61881868 
.63049451 
.64217033 

.65384615 
.66552198 
.67719780 
. 68887363 
. 70054945 

.71222527 
.72390110 
. 73557692 
. 74725275 
. 75892857 

. 77060440 
. 78228022 
. 79395604 
.80563187 
. 81730769 

$.41803279 
.42964481 
.44125683 
. 45286885 
.46448087 

.47609290 
.48770492 
.49931694 
.51092896 
.52254098 

.53415301 
.54576503 
.55737705 
. 56898907 
. 58060109 

.59221311 
.60382514 
.61543716 
.62704918 
.63866120 

. 65027322 
.66188525 
. 67349727 
.68510929 
.69672131 

.70833333 
.71994536 
.73155738 
.74316940 
.75478142 

.76639344 
.77800546 
. 78961749 
.80122951 
.81284153 

$.41576087 
.42730978 
.43885870 

39 

40 

. 45040761 
.46195652 

41 

42 

43 

44 

.47350543 
.48505435 
.49660326 
.50815217 

45 

.51970109 

46 

.53125000 

47 

.54279891 

48 

.55434783 

49 

.56589674 

50 

.57744565 

51 

.58899457 

52 

.60054348 

53 

.61209239 

54 

.62364130 

55 

.63519022 

56 

.64673913 

57 

.65828804 

58 

.66983696 

59 

. 68138587 

60 

.69293478 

61 

.70448370 

62 

.71603261 

63 

.72758152 

64 

. 73913043 

65 

. 75067935 

66 

.76222826 

67 

.77377717 

68 

.78532609 

69 

. 79687500 

70 

.80842391 

TREASURY  DECISIONS. 


327 


T.  D.  2802. 


Days. 

Half  year  of 
181  days. 

Half  year  of 
182  days. 

Half  voar  of 
183  days. 

Half  year  of 

184  day-. 

71 

$.83356354 
. 84530387 
.85704420 
.86878453 
.88052486 

.89226519 
. 90400552 
.91574586 
.92748619 
.93922652 

.95096685 
.96270718 
.97444751 
.98618785 
.99792818 

1.00966851 
1.02140884 
1.03314917 
1.04488950 
1.05662983 

1.06837017 
1.08011050 
1.091850S3 
1.10359116 
1.11533149 

1 . 12707182 
1.13881215 
1  15055249 
1 . 16229282 
1.17403315 

1 . 18577348 
1.19751381 
1.20925414 
1.22099447 
1  23273481 

$.82898352 
. 84065934 
.85233517 
.86401099 
.87568681 

. 88736264 
.89903846 
.91071429 
.9223«.)()11 
.93406593 

.94574176 
.95741758 
.96909341 
.98076923 
.99244506 

1.00412088 
1.01579670 
1.02747253 
1.03914835 
1.05082418 

1 . 06250000 
1.07417582 
1.08585165 
1.09752747 
1 . 10920330 

1 . 12087912 
1 . 13255495 
1 . 14423077 
1 . 15590659 
1 . 1675S242 

1.17925824 
1 . 19093407 
1.20260989 
1.21428571 
1.22596154 

$.82445355 
. 83606557 
. 84767760 
.85928962 
.87090164 

.88251366 
.89412568 
.90573771 
.91734973 
.92896175 

.94057377 
.95218579 
.96379781 
.97540984 
.98702186 

.99863388 
1.01024590 
1.02185792 
1.03346995 
1.04508197 

1.05669399 
1.06830601 
1.07991803 
1.09153005 
1.10314208 

1.11475410 
1.12636612 
1.13797814 
1 . 14959016 
1.16120219 

1.17281421 
1 . 18442623 
1 . 19603825 
1.20765027 
1.21926230 

$.81997283 

72 

.83152174 

73 

. 84307065 

74 

.85461956 

75 

76 

86616848 
.87771739 

77 

. 88926630 

78 

.90081522 

79 

.91236413 

80 

.92391304 

81 

93546196 

82 

.94701087 

83 

. 95855978 

84 

.97010870 

85... 

.98165761 

86 

.99320652 

87 

1.00475543 

88 

1.01630435 

89 

1 . 02785326 

90 

1.03940217 

91 

1.05095109 

92 

1 . 06250000 

93 

1.07404891 

94 

1.08559783 

95 

1.09714674 

96 

1 . 10869565 

97 

1 . 12024456 

98 

1.13179348 

99 

100 

101 

I . 14334239 
1 . 15489130 

1 . 16644022 

102 

103 

104 

1.17798913 
1 . 18953804 
1.20108696 

105 

1.21263587 

328 


FEDERAL  ESTATE  TAX. 


T.  D.  2802. 


Days. 

Half  year  of 
181  days. 

Half  year  of 
182  days. 

Half  year  of 
183  days. 

Half  vear  of 
184  days. 

106 

$1.24447514 
1.25621547 
1.26795580 
1.27969613 
1.29143646 

1.30317679 
1.31491713 
1.32665746 
1.33839779 
1.35013812 

1.36187845 
1.37361878 
1.38535911 
1.39709945 
1.40883978 

1.42058011 
1 . 43232044 
1.44406077 
1.45580110 
1.46754144 

1.47928177 
1.49102210 
1.50276243 
1.51450276 
1.52624309 

1.53798342 
1 . 54972376 
1 . 56146409 
1 . 57320442 
1 . 58494475 

1.59668508 
1.60842541 
1.62016574 
1.63190608 
1.64364641 

$1.23763736 
1.24931319 
1.26098901 
1.27266484 
1.28434066 

1.29601648 
1.30769231 
1.31936813 
1.33104396 
1.34271978 

1 . 35439560 
1.36607143 
1.37774725 
1.38942308 
1.40109890 

1.41277473 
1.42445055 
1.4361267 
1.44780220 
1 . 45947802 

1.47115385 
1.48282967 
1.49450550 
1.50618132 
1.51785714 

1.52953297 
1 . 54120879 
1.55288462 
1 . 56456044 
1.57623626 

1.58791209 
1.59958791 
1.61126374 
1 . 62293956 
1.63461539 

$1.23087432 
1.24248634 
1.25409836 
1.26571038 
1.27732240 

1.28893443 
1 . 30054645 
1.31215847 
1.32377049 
1.33538251 

1 . 34699454 
1 . 35860656 
1.37021858 
1.38183060 
1.39344262 

1 . 40505465 
1.41666667 
1 . 42827869 
1 . 43989071 
1.45150273 

1.4631H75 
1.47472678 
1 . 48633880 
1 . 49795082 
1 . 50956284 

1.52117486 
1.53278689 
1.54439891 
1.55601093 
1 . 56762295 

1.57923497 
1 . 59084699 
1.60245902 
1.61407104 
1.62568306 

$1.22418478 

107 

1 . 23573370 

108 

1.24728261 

109 

1.25883152 

110 

1.27038043 

Ill 

1.28192935 

112 

1 . 29347826 

113 

1.30502717 

114 

1.31657609 

115 

1.32812500 

116 

1.33967391 

117 

1.35122283 

118 

1.36277174 

119 

1.37432065 

120 

1.38586956 

121 

1.39741848 

122 

1.40896739 

123 

1.42051630 

124 

1.43206522 

125 

1.44361413 

126 

1.45516304 

127 

1.46671196 

128 

129 

130 

1.47826087 
1.48980978 
1.50135870 

131 

132 

1.51290761 
1.52445652 

133 

1 . 53600543 

134  

1.54755435 

135 

1.55910326 

136 

1.57065217 

137 

1.58220109 

138 

1.59375000 

139 

1.60529891 

140 

1.61684783 

TREASURY  DECISIONS. 


329 


T.  D.  2802. 


Days. 


Half  year  of 
181  days. 


Half  vear  of 
182  davs. 


Half  vear  of 
183  days. 


Half  year  of 
184  days. 


141. 
142. 
143. 
144. 
145. 

146. 
147 
148. 
149 
150. 

151. 
152. 
153. 
154 
155 

156 
157 
158 
159 
160 

161 
162 
163 
164 
165 

166 
167 
168 
169 
170 

171 

172 
173 
174 
175 


$1.65538674 
1.66712707 
1.67886740 
1.69060773 
1 . 70234807 

1.71408840 
1.72582873 
1 . 73756906 
1 . 74930939 
1.76104972 

1.77279005 
1 . 78453039 
1.79627072 
1.80801105 
1.81975138 

1.83149171 
1 . 84323204 
1.85497238 
1.86671271 
1.87845304 

1.89019337 
1.90193370 
1.91367403 
1.92541436 
1.93715470 

1.94889503 
1.96063536 
1.97237569 
1.98411602 
1.99585635 

2.00759668 
2.01933702 
2.03107735 
2.04281768 
2.05455801 


$1.64629121 
1.65796703 
1 . 66964286 
1.68131868 
1.69299451 

1.70467033 
1.71634615 
1.72802198 
1.73969780 
1.75137363 

1.76304945 
1.77472528 
1.78640110 
1.79807692 
1.80975275 

1.82142857 
1.83310440 
1.84478022 
1.85645604 
1.86813187 

1.87930769 
1.89148352 
1.90315934 
1.91483517 
1.92651099 

1.93818681 
1.94986264 
1.96153846 
1.97321429 
1.98489011 

1.99656593 
2.00824176 
2.01991758 
2.03159341 
2.04326923 


$1.63729508 
1.64890710 
1.66051913 
1.67213115 
1.68374317 

1.69535519 
1.70696721 
1.71857924 
1.73019126 
1.74180328 

1.75341530 
1.76502732 
1.77663934 
1.78825137 
1.79986339 

1  81147541 
1.82308743 
1 . 83469945 
1.84631148 
1 . 85792350 

1.86953552 
1.88114754 
1.89275956 
1.90437159 
1.91598361 

1 . 92759563 
1.93920765 
1.95081967 
1.96243109 

1.97404372 

1.98565574 
1 . 99726776 
2.00887978 

2  02049180 
2.03210383 


$1.62839674 
1 . 63994565 
1.65149456 
1 . 66304348 
1 . 67459239 

1.68614130 
1 . 69769022 
1.70923913 
1 . 72078804 
1 . 73233696 

1 . 74388587 
1 . 75543478 
1 . 76698370 
1.77853261 
1.79008152 

1.80163043 
1.81317935 
1 . 82472826 
1.83627717 
1.84782609 

1.85937500 
1.87092391 
1 . 88247283 
1.89402174 
1 . 90557065 

1.91711956 
1 . 92866848 
1.94021739 
1.95176630 
1.96331522 

1.97486413 
1.98641304 
1.99796196 
2.00951087 
2  02105978 


330 


FEDERAL  ESTATE  TAX. 


T.  D.  2802. 


Days. 

Half  year  of 
181  days. 

Half  year  of 
182  days. 

Half  year  of 
183  days. 

Half  year  of 
184  "days. 

176 

$2 . 06629834 
2.07803867 
2.08977901 
2.10151934 
2.11325967 

2.12500000 

$2 . 05494506 
2.06662088 
2 . 07829670 
2.08997253 
2.10164835 

2.11332418 
2.12500000 

?2. 04371585 
2 . 05532787 
2.06693989 
2.07855191 
2.09016393 

2.10177596 
2.11338798 
2.12500000 

$2 . 03260870 

177 

2.04415761 

178 

2.05570652 

179 

2 . 06725543 

180 

2 . 07880435 

181.... 

2 . 09035326 

182 

2.10190217 

183... 

2.11345109 

184 

2 . 12500000 

EXAMPLE. 

$10,000  third  Liberty  loan  4%  per  cent  bond  of 
1928,  tendered  in  payment  of  estate  taxes,  January 
5,  1919. 

Interest  payment  dates  on  third  Liberty  loan 
bonds  are  shown  on  the  face  thereof  to  be  March  15 
and  September  15  in  each  year. 

Current  half  year  interest  period  therefore  ends 
March  15,  1919. 

The  year  1919  being  a  "regular"  (not  a 
"leap")  year,  find  "March"  in  the  list  at  head  of 
table  under  "Regular  years."  This  list  shows  that 
the  half  year  ending  March  15,  in  a  regular  year, 
has  181  days. 

Compute  number  of  days  since  the  beginning  of 
such  half  year  that  have  expired  to  date  of  tender 
of  bond,  thus: 


TREASURY  DECISIONS.  333 

T.  D.  2802. 

1918  Days 

September  15  to  September  30 L5 

October 31 

November 30 

December 31 

1919 

January 5 

Total 112 

Enter  table  headed  "Half  year  of  181  days" 
(second  column)  and  seek  in  that  column  the 
amount  of  interest  on  $100  for  112  days.  This  will 
be  found  opposite  the  figure  "112"  (days)  in  first 
column,  and  proves  to  be  $1.31491713. 

$100  is  1/100  of  $10,000  (found  by  division),  and 
the  amount  of  interest  accrued  on  a  $10,000  bond 
is  therefore  100  times  the  amount  shown  on  the 
table,  or  $131.491713. 

The  figures  more  than  two  places  to  the  right  of 
the  decimal  point  are  fractions  of  a  cent  (in  this 
example,  1713).  Fractions  more  than  one-half  a 
cent  will  be  taken  as  one  cent  and  added  to  the  total : 
when  less  than  one-half  a  cent  they  will  be  disre- 
garded. In  this  case  .1713  of  a  cent  is  less  than  one- 
half  a  cent;  consequently,  the  fraction  will  be  dis- 
regarded, making  the  final  figure  of  accrued  interest 
sought  $131.49.  The  bond  is  worth  for  estate  taxes 
$10,131.49. 

When  more  than  one  bond  is  tendered  in  payment 


332  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

of  estate  taxes,  each  bond  will  be  computed  separ- 
ately, by  the  use  of  its  proper  table,  and  the  result 
stated  with  the  full  resulting  number  of  decimal 
places.  These  sums  will  then  be  added  together,  and 
the  adjustment  of  fractions  of  a  cent  applied  to  the 
total,  thus:  Supposing,  instead  of  one  bond  of  the 
par  value  of  $10,000,  three  such  bonds  were  ten- 
dered, the  result  would  be — 

First  bond    $131.491713 

Second  bond 131.491713 

Third  bond  131.491713 

Total $394.475139 

In  this  case  the  fraction  of  a  cent  (0.5139)  is 
greater  than  one-half  a  cent;  consequently,  the 
accrued  interest  is  $394.48,  and  the  bonds  are  worth 
for  estate  taxes  $30,394.48. 


Treasury  Department, 
internal  revenue. 
Form  761. 

SCHEDULE  OF  COUPON  BONDS  RECEIVED  BY  COLLECTOR  IN 

PAYMENT    OF    ESTATE    OR    INHERITANCE    TAXES 

AND  TRANSMITTED  TO   FEDERAL  RESERVE 

BANK. 

,  19.... 

Schedule  of  United  States  coupon  bonds 

Liberty  Loan  ,  per  cent,  dated 


TREASURY  DECISIONS. 


333 


T.  D.  2802. 


,  19...,  due  19...,  received  by 

collector  of  internal  revenue  of  the district 

of ,  in  payment  of  estate  (or  inheritance) 

taxes  and  transmitted   on   the   above   date   to   the 

Federal  Reserve  Bank  of 

(Signed)     , 

Collector. 
(Use  separate  schedule  for  each  issue  of  bonds. 
Enter  each  bond  of  such  issue  separately.) 


Serial  No.  of 
bond. 

Face 
value. 

Accrued 
interest. 

Total 
(amount 

for  which 
accepted 

for  taxes). 

Date  ac- 
cepted by 
collector. 

Total. . 

Federal  Reserve  Bank  of 


,19 


I  hereby  certify  that  I  have  examined  and  for- 
warded to  the  Treasurer  of  the  United  States  the 

22 


334 


FEDERAL  ESTATE  TAX. 


T.  D.  2802. 


above-described  bonds,  which  were  received  from 
the  collector  named,  amounting  to  $ ,  prin- 
cipal, and  $ ,  accrued  interest,  which  amounts 

have  been  charged  and  credited  in  the  Treasurer's 
general  account  this  day  pursuant  to  the  regula- 
tions of  the  Treasury  Department. 


Cashier. 


Table  {d). 

PERIODS    DURING    WHICH    TRANSFER    BOOKS    ARE    CLOSED 
FOR  THE   VARIOUS   ISSUES  OF  LIBERTY   BONDS 
RECEIVABLE   FOR   ESTATE   OR   INHERIT- 
ANCE   TAXES. 


Title  of  bonds. 


First  Liberty  loan  converted  4\4  per  cent  bonds  of 
1932-47 

First  Liberty  loan  second  converted  4J4  per  cent 
bonds  of  1932-47 

Second  Liberty  loan  converted  4J4  per  cent  bonds 
of  1927-42 

Third  Liberty  loan  4  J4  per  cent  bonds  of  1928  . . . 

Fourth  Liberty  loan  4}4  per  cent  bonds  of  1933-38 


Closed  periods. 


From 
close  of 
business. 


May  15 

Nov.  15 

Apr.  15 
Oct.  15 
/Feb.  15 
\Aug.  15 
/Mar.  15 
\Sept.  15 


To  open- 
ing of 
business. 


June  16 

Dec.   16 

M?y  16 
Ncv.  16 
Mar.  16 
Sept.  16 
Apr.  16 
Oct.    16 


TREASURY  DECISIONS.  336 


T.  D.  2802. 


Note. — If  the  closing  date  falls  on  a  Sunday  or 
legal  holiday,  the  transfer  books  will  close  on  the 

preceding  day;  if  the  opening  date  Tails  on  a  Sunday 
or  legal  holiday,  the  books  will  open  on  the  follow- 
ing day. 

Form  (e). 

....(Date) 19.  .. 

Secretary  of  the  Treasury, 

Division  of  Loans  and  Currency, 
Washington,  D.  C: 

Stop  interest  on  registered  bonds  inscribed 

(Name  of  registered  owner) ,  aggregate  face 

value (Total   par  value  of  bonds) 

first 

second 

third 

fourth 

dollars  Liberty    loan     (if    converted    or 

second  converted,  so  state) per  cent,  dated 

,  191. . .,  due  19.  .  .,  this  day  received  for 

estate  (or  inheritance)  taxes. 


Collector. 

(Bonds  of  only  one  owner  and  of  one  issue  in  one 
advice.) 

r  Sample  of  above  telegram.  | 


336  FEDERAL  ESTATE  TAX. 

T.  D.  2802. 

Chicago,  May  14,  1919. 
Secretary  of  the  Treasury, 

Division  of  Loans  and  Currency, 
Washington,  D.  C: 
Stop  interest  on  registered  bonds  inscribed  John 
Doe  aggregate  face  value  four  thousand  four  hun- 
dred fifty  dollars  first  Liberty  loan  second  converted 
four  and  one  quarter  per  cent  dated  October  twenty- 
four  nineteen  eighteen  due  nineteen  thirty-two 
forty-seven  this  day  received  for  estate  taxes. 

Richard  Roe,  Collector. 


Treasury  Department, 
internal  revenue, 
Form  762. 

SCHEDULE  OF  REGISTERED  BONDS  RECEIVED  BY  COLLECTOR 
IN  PAYMENT  OF  ESTATE  TAXES  AND  TRANSMITTED  TO 
THE  SECRETARY  OF  THE  TREASURY,  DIVISION  OF  LOANS 
AND    CURRENCY. 

,19... 

Schedule  of  United  States  registered  bonds 

Liberty   loan    ,    per 

cent,  dated  ,  19. . .,  due  19. . .,  received 

by ,  collector  of  internal  revenue  of  the 

district  of   ,  in  payment  of 

estate  (or  inheritance)  taxes  and  transmitted  on  the 


TREASl'KY  DECISIONS. 


337 


T.  D.  2802. 


above  date  to  the  Secretary  of  the  Treasury,  Divi- 
sion of  Loans  and  Currency. 

(Signed)   

Collector. 
(Use  separate  schedule  for  each  issue  of  bonds. 
Knter  each  bond  of  such  issue  separately.) 


Serial 
No. 

Name 

of 

registered 

owner. 

Date  of 

death  of 

registered 

owner. 

Face 
value. 

Accrued 
interest. 

Total 

(amount 

for  which 

accepted 

for  taxes). 

Date  ac- 
cepted by 
collector. 

Total. 

338 


FEDERAL  ESTATE  TAX. 


T.  D.  2802. 


Treasury  Department, 

l.oans  and  currency, 

Form  L.  &  C.  122. 

Treasury  Department, 
Office  of  the  Secretary, 
Division  of  Loans  and  Currency, 

Washington, ,  19.  . 

The  Treasurer  of  the  United  States. 
Sir:    You  are  advised  that  the  attached  bond. ., 

registered  in  the  name  of received 

by  the  collector  of  internal  revenue,   

district  of ,  in  payment  of  estate  or  in- 
heritance taxes  on  the  estate  of  said  registered 
owner,  have  been  examined  and  found  to  be  duly 
assigned  to  the  Secretary  of  the  Treasury  for  re- 
demption in  payment  of  estate  (or  inheritance) 
taxes,  and  to  be  receivable  in  payment  of  such  taxes 
at  the  values  shown  in  the  following  table : 


Serial 
No. 

Description  of 
issue. 

Face 
value. 

Accrued 
interest. 

Total 
value  for 
payment 

of  tax. 

TKKASUKY   DKCISloNS.  339 


T.  D.  2878. 


(Bonds  of  only  one  owner  on  each  form.     Bach 

bond  must  be  entered  separately.) 

Total $ 

Respectfully, 


Chief  Division  of  Loans 
and  Currency. 


(T.  D.  2878.) 

Receipt  of  Liberty  bonds  for  estate  or  inheritance  taxes. 

Treasury  Department, 
Office  of  Commissioner  of  Ixtkrnal  Revenue, 

Washington,  I).  0. 
To  collectors  of  internal  revenue  and   others  con- 
cerned : 
Referring  to  T.  D.  2705,  dated  April  23,  1918,  de- 
partment circular  No.  132,  dated  January  30,  1919, 
and  T.  D.  2802,  dated  March  12,  1919,  as  to  the 
receipt  of  Liberty  bonds  for  estate  or  inheritance 
taxes,  the  date  of  original  subscription  or  the  date 
of  the  bonds,  whichever  date  shall  be  later  in  time, 
shall   be  deemed  the  date   of  acquisition   in   cases 
where  the  bonds  are  acquired  by  original  subscrip- 
tion,  provided   that   payment    in    full   on   the   sub 
scription    be    completed    and    the    bonds    delivered 
thereon. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


340  FEDERAL  ESTATE  TAX. 

T.  D.  2898. 

Approved  July  2,  1919: 
L.  S.  Rowe, 

Acting  Secretary  of  the  Treasury. 


(T.  D.  2898.) 

Receipt  of  Liberty  bonds  for  estate  or  inheritance  taxes. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
Referring  to  T.  D.  2705,  dated  April  23,  1918, 
department  circular  No.  132,  dated  January  30, 
1919,  and  T.  D.  2802,  dated  March  12,  1919,  as  to 
the  receipt  of  Liberty  bonds  for  estate  or  inherit- 
ance taxes,  in  the  case  of  the  acquisition  of  bonds 
by  conversion  of  4  per  cent  bonds  of  the  first  Liberty 
loan  converted  or  of  the  second  Liberty  loan  pre- 
viously owned;  pursuant  to  the  extension  of  the 
conversion  privilege  made  by  Treasury  Department 
circular  No.  137,  dated  March  7,  1919,  as  supple- 
mented June  10,  1919,  the  date  from  which  the 
bonds  issued  upon  such  conversion  bear  interest  at 
the  rate  of  4*4  per  cent  per  annum,  and  not  the  date 
of  presentation  of  the  4  per  cent  bonds  for  con- 
version, will  be  deemed  the  date  of  acquisition  for 


TREASURY  DECISIONS.  341 

T.  D.  2904. 

the  purpose   of  reckoning  the   required   period  of 
ownership. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  July  24,  1919: 
Carter  Glass: 

Secretary  of  the  Treasury. 


(T.  D.  2904) 

Receipt  of  4%  per  cent  Victory  notes  for  estate  or  inheritance 
taxes. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 
Referring  to  Treasury  Department  circular  No. 
151,  dated  June  24,  1919,  as  to  the  receipt  of  4% 
per  cent  Victory  notes  for  estate  or  inheritance 
taxes,  the  date  of  original  subscription,  or  the  date 
of  the  notes,  whichever  date  shall  be  later  in  time, 
shall  be  deemed  the  date  of  acquisition  in  cases 
where  the  notes  are  acquired  by  original  subscrip- 
tion, provided  that  payment  in  full  on  the  sub- 
scription be  completed  and  the  notes  delivered 
thereon. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 


342  FEDERAL  ESTATE  TAX. 

T.  D.  2905. 

Approved  July  31,  1919: 
Carter  Glass: 

Secretary  of  the  Treasury. 


(T.  D.  2905.) 
Estate  tax. 

Receipt  of  4%  per  cent  Victory    notes   for    estate    or    inheritance 
taxes. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 

The  appended  department  circular  No.  151, 
issued  under  date  of  June  24,  1919,  with  reference 
to  the  receipt  of  4%  per  cent  Victory  notes  in  pay- 
ment of  estate  or  inheritance  taxes,  and  supple- 
menting department  circular  No.  132,  dated  January 
30,  1919  (T.  D.  2802),  as  to  receipt  of  Liberty  bonds 
for  estate  or  inheritance  taxes,  is  published  for  the 
information  of  internal-revenue  officers  and  others 
concerned.  This  decision  is  supplementary  to 
article  91  of  regulations  No.  37,  revised,  1919. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 

Approved  July  31,  1919: 
Carter  Glass, 

Secretary  of  the  Treasury. 


TREASUKY  DECISIONS.  343 

T.  D.  2905. 

RECEIPT  OF  4%  PER  CENT  VICTORY  NOTES  FOR  ESTATE  "1: 
INHERITANCE    TAXES. 

(1)  Any  of  the  Victory  Liberty  loan  4%  per  cenl 
convertible  gold  notes  of  1922-23,  hereinafter  called 
4%  per  cent  Victory  notes,  which  have  been  owned 
by  any  person  continuously  for  at  least  six  months 
prior  to  the  date  of  his  death,  and  which  upon  such 
date  constitute  part  of  his  estate,  shall  be  receivable 
by  the  United  States  at  par  and  accrued  interest  in 
payment  of  any  estate  or  inheritance  taxes  imposed 
by  the  United  States,  under  or  by  virtue  of  any 
present  or  future  law,  upon  such  estate  or  the  in- 
heritance thereof,  in  accordance  with  the  rules  and 
regulations  prescribed  by  the  Secretary  of  the 
Treasury  herein  and  in  Treasury  Department  cir- 
cular No.  132,  dated  January  30, 1919,  the  provisions 
of  which  circular  are  hereby  extended,  subject  to 
the  provisions  hereof,  to  such  4%  per  cent  Victory 
notes.  (The  4%  per  cent  Victory  notes  are,  of 
course,  not  yet  receivable  in  payment  of  such  taxes. 
The  3%  per  cent  Victory  notes  are  not,  under  exist 
ing  law,  receivable  in  payment  of  such  taxes.) 

(2)  The  word  "bond"  or  "bonds,"  where  it 
appears  in  said  circular,  shall  be  deemed,  subject  to 
the  provisions  hereof,  to  include  ¥Y\  per  cent  Victory 
notes;  provided,  however,  that  the  accrued  interest 
to  the  date  of  reeeipt  for  taxes  will  be  determined  in 
the  case  of  both  cupon  and  registered  4%  per  cent 
Victory  notes  in  the  manner  prescribed  by  the  in- 
terest table  hereto  attached  (Form  L.  &  C.  226)  and 


344  FEDERAL  ESTATE  TAX. 

T.  D.  2905. 

not  in  the  manner  prescribed  by  the  interest  table 
(b)  attached  to  said  circular.  Internal-revenue 
Forms  760,  761,  and  762,  Form  L.  &  C.  122,  and  tele- 
graph Form  (e)  attached  to  said  circular  shall  be 
used  in  connection  with  43/4  per  cent  Victory  notes, 
the  word  notes  being  substituted  for  the  word  bonds 
wherever  it  appears. 

(3)  The  transfer  books  for  registered  4%  per 
cent  Victory  notes  will  be  closed  from  the  close  of 
business  May  15  to  the  opening  of  business  June  16, 
and  from  the  close  of  business  November  15  to  the 
opening  of  business  December  16,  in  each  of  the 
years  1920,  1921,  1922,  and  from  the  close  of  busi- 
ness on  April  20,  1923.  The  registered  notes  have 
coupons  attached  thereto  for  interest  payable 
December  15, 1919,  and  the  transfer  books  will  there- 
fore not  be  closed  during  the  year  1919.  The 
coupons  maturing  December  15,  1919,  must  be 
attached  to  registered  notes  received  in  payment  of 
taxes  before  December  15,  1919. 

(4)  The  Secretary  of  the  Treasury  may  amend  or 
withdraw  the  foregoing  rules  and  regulations  in 
whole  or  in  part  at  any  time. 

Carter  Glass, 
Secretary  of  the  Treasury. 


TREASURY  DECISIONS.  345 

T.  D.  2905. 

Treasury  Department, 

division  of  loans  and  cubbency, 

Form  L.  &  C.  226. 

Victory  Liberty  Loan. 
Interest  table  for  4%  per  cent  Victory  notes  received 
for  estate  or  inheritance  taxes. 
[Prepared  by  Government  actuary.] 
Note. — Interest  on  Victory  notes  is  computed  on 
actual  day's  basis  within  the  interest  period.     For 
any   given    interest   computation,    the    appropriate 
column  to  be  used  may  be  determined  from  the  fol- 
lowing : 

NUMBER   OF   DAYS   IN    EACH   HALF   YEAR. 

Half  year  ending  the  loth  day  of — 
Regular  years —       Days  Leap  years —  Days 

June 182      June 183 

December 183       December 183 


346 


FEDERAL  ESTATE  TAX. 


T.  D.  2905. 


Number 
of  days 


1. 

2. 
3. 
4. 
5. 

6. 
7. 
8. 
9. 

10. 

11. 
12. 
13. 
14. 
15. 

16. 

17. 
18. 
19. 
20. 

21. 

22. 
23. 
24. 
25. 

26. 
27. 
28. 
29. 
30. 


Interest  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2%  per  cent  per  half 
year). 


Half  vear 
of  182 
days. 


Half  year 
of  183 
days. 


$0.0130495  $0.0129781 

.0260989  .0259563 

.0391484  .0389344 

.0521978  .0519126 

.0652473  .0648907 


.0782967 
.0913462 
.1043956 
.1174451 
.1304945 

.1435440 
.1565934 
.1696429 
.1826923 
.1957418 

.2087912 
.2218407 
.2348901 
.2479396 
.2609890 


.0778689 
.0908470 
.1038251  I  38. 


.1168033 
.1297814 

.1427596 
.1557377 
.1687158 
.1816940 
.1946721 

.2076503 
.2206284 
.2336066 
.2465847 


2740385 

.2725416 

2870879 

.2855191 

3001374 

.2984973 

3131868 

.3114754 

3262363 

.3244536 

3392857 

.3374317 

3523352 

.3504098 

3653846 

.3633880 

3784341 

.3763661 

3914835 

.3893443 

Number 

of  davs 


31. 

32. 
33. 


34. 
35. 


39. 
40. 


41. 
42. 

43. 
14. 
45. 

46. 
47. 
48. 
49. 


.2595628  50 


51. 

52. 
53. 
54. 

55. 

56. 

57. 
58. 
59 . 
60. 


Interest  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2%  per  cent  per  half 
year). 


Half  year 

of  182 
days. 

$0.4045330 
.4175824 
.4306319 
.4436813 
.4567308 

.4597802 
.4828297 
.4058791 
.5089286 
.5219780 

.5350275 
.5480769 
.5611264 
.5741758 
.5872253 

.6002747 
.6133242 
.6263736 
.6494231 
.6524725 

.6655220 
.6785714 
.6916209 
.7046703 
.7177198 

.7307692 
.7438187 
.7568681 
.7699176 
.7829670 


Half  year 
of  183 
days. 

$0.4023224 
.4153005 
.4282787 
.4412568 
.4542350 

.4672131 
.4801913 
.4931694 
.5061475 
.5191257 

.5321038 
.5450820 
.5580601 
.5710382 
.5840164 

.5969945 
.6099727 
.6229508 
.6359290 
.6489071 

.6618852 
.6748634 
.6878415 
.7008197 
.7137978 

.7267760 
.7397541 
.7527322 
.7657104 
.7786885 


TREASURY  DECISIONS. 


347 


T.  D.  2905. 


Number 
of  days 


Interest  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2%  per  cent  per  half 
year). 


Half  rear 
of  182 
days. 


Half  year 
of  183 
dayB. 


61 $0.7960165  $0.7916667 

62 8090659  .8046448 

63 8221154  -.8176230 

64 8351548  .8306011 

65 8482143  .8435792 

66 8612637  .8565574 

67 8743132  .8695355 

68 8873626  .8825137 

69 9004121  .8954918 

70 9134615  .9084699 

71 9265110  .9214481 

72 9395604  .9344262 

73 9526099  .9474044 

74 9656593  .9603825 

75 9787088  .9733607 

76 9917582  .9863388 

77 1.0048077  .9993169 

78 1.0178571  1.0122951 

79 1.0309066  1.0252732 

80 1.0439560  1.0382514 

81 1.0570055  1.0512295 

82 1.0700549  1.0642077 

83 1.0831044  1.0/71858 

84 1.0961538  1.0901639 

85 1.1092033  1.1031421 

86 1.1222527  1.1161202 

87 1.1353022  1.1290984 

88 1.1483516  1.1420765 

89 1.1614011  1.1550546 

90 1.1744505  1.1680328 


[nteresl  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2:ts  per  cenl  per  half 
year). 


Number 

of  <lavs 

Halt'  jreai 

Half  year 

of  182 

of  1-. 

days. 

days. 

91 

fel.1875000 

$1.1810109 

92 

1.20(1:,  lit.", 

1.1939891 

1.2135989 

1.2069672 

94 

L.2266484 

1.2199454 

1.2396978 

1.2329235 

96 

L2527473 

1.2459016 

97 

1.2<;f)7967 

1.2588798 

98 

1.2788462 

1.2718579 

99 

1.291X956 

L2848361 

100 

1.3049451 

1.2978142 

101 

1..:  179945 

1.3107923 

in- 

1.3310440 

1.3237705 

103 

1.3440934 

1.3367486 

104 

1.3571429 

1.3497268 

105 

1.3701923 

1.3627049 

100 

1.3832418 

1.3756831 

107 

1.3962912 

L  .3886612 

108 

1.4093407 

1.4016393 

109 

1.4223901 

1.4146175 

110 

1.4354396 

1.4275956 

Ill 

L.4484890 

L.4405738 

112 

L.4615385 

1.4535519 

113 

1.4745879 

1.4665301 

114 

1.4876374 

1.4795082 

115 

1.5006868 

1.4924863 

116 

1.5137363 

1.5054645 

117 

1.5267857 

1.5184426 

118 

L.5398352 

L.5314208 

119 

1.5528846 

1.5443989 

120 

L5659341 

1.5573770 

348 


FEDERAL  ESTATE  TAX. 


T.  D.  2905. 


Interest  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2%  per  cent  per  half 
year) . 

Half  year 
of  183 
days. 

$1.5703552 
1.5833333 
1.5963115 
1.6092896 
1.6222678 

1.6352459 
1.6482240 
1.6612022 
1.6741803 
1.6871585 

1.7001366 
1.7131147 
1.7260929 
1.7390710 
1.7520492 

1.7650273 
1.7780055 
1.7909836 
1.8039617 
1.8169399 

1.8299180 
1.8428962 
1.855S743 
1.8688525 
1.8818306 

1.8948087 
1.9077869 
1.9207650 
1.9337432 
1.9467213 

1.9596995 
1.9726776 


Number 

of  days 

Half  year 

of  182 

days. 

121 

$1.5789835 

122 

1.5920330 

123 

1.6050824 

124 

1.6181319 

125 

1.6311813 

126 

1.6442308 

127 

1.6572802 

128 

1.6703297 

129 

1.6833791 

130 

1.6964286 

131 

1.7094780 

132 

1.7225275 

133 

1.7355769 

134 

1.7486264 

135 

1.7616758 

136 

1.7747253 

137 

1.7877747 

138 

1.8008242 

139 

1.8138736 

140 

1.8269231 

141 

1.8399725 

142 

1.8530220 

143 

1.8660714 

144 

1.8791209 

145 

1.8921703 

146 

1.9052198 

147 

1.9182692 

148 

1.9313187 

149 

1.9443681 

150 

1.9574176 

151 

1.9704670 

152 

1.9835165 

Interest  on  $100  at  4% 
per  cent  per  annum, 
payable  semiannually 
(2%  per  cent  per  half 
year). 


Number 

of  days 

Half  year 

Half  year 

of  182 

of  183 

days. 

days. 

153 $1.9965659  $1.9856557 

154 2.0096154  1.9986339 

155 2.0226648  2.0116120 

156 2.0357143  2.0245902 

157 2.0487637  2.0375683 

158 2.0618132  2.0505464 

159 2.0748626  2.0635246 

160 2.0879121  2.0765027 

161 2.1009615  2.0894809 

162 2.1140110  2.1024590 

163 2.1270604  2.1154372 

164 2.1401099  2.1284153 

165 2.1531593  2.1413934 

166 2.1662088  2.1543716 

167 2.1792582  2.1673497 

168 2.1923077  2.1803279 

169 2.2053571  2.1933060 

170 2.2184066  2.2062842 

171 2.2314560  2.2192623 

172 2.2445055  2.2322404 

173 2.2575549  2.2452186 

174 2.2706044  2.2581967 

175 2.2836538  2.2711749 

176 2.2967033  2.2841530 

177 2.3097527  2.2971311 

178 2.3228022  2.3101093 

1 79 2.3358516  2.3230874 

180 2.3489011  2.3360656 

181 2.3619505  2.3490437 

182 2.3750000  2.3620219 

183 2.375000 


TREASURY  DECISIONS.  349 

T.  D.  2905. 

EXAMPLE. 

$10,000  4%  per  cent  Victory  note  tendered  in  pay- 
ment of  estate  taxes,  January  5,  1920. 

Interest  payment  dates  on  Victory  notes  are 
shown  on  the  face  thereof  to  be  June  15  and  Decem- 
ber 15  in  each  year,  and  at  maturity. 

Current  half-year  interest  period  therefore  ends 
June  15,  1920. 

The  year  1920  being  a  leap  year,  find  ''June"  in 
the  list  of  table  under  ''Leap  year."  This  list 
shows  that  the  half  year  ending  June  15,  in  a  leap 
year,  has  183  days. 

Compute  number  of  days  since  the  beginning  of 
such  half  year  that  have  expired  to  date  of  tender 
of  note,  thus : 

1919                                                      Days 
December  15  to  December  31 16 

1920 
January 5 

Total 21 

Enter  table  headed  "Half  year  of  183  days" 
(second  column)  and  seek  in  that  column  the  amount 
of  interest  on  $100  for  21  days.  This  will  be  found 
opposite  the  figure  "21"  (days)  in  second  column, 
and  proves  to  be  $0.272,5410. 

$100  is  1/100  of  $10,000  ( 1'ound  by  division),  and 
the  amount  of  interest  accrued  on  a  $10,000  note  is 

23 


350  FEDERAL  ESTATE  TAX. 

T.  D.  2905. 

therefore  100  times  the  amount  shown  on  the  table, 
or  $27.25410. 

The  figures  more  than  two  places  to  the  right  of 
the  decimal  point  are  fractions  of  a  cent  (in  this 
example,  410).  Fractions  more  than  one-half  a  cent 
will  be  taken  as  1  cent  and  added  to  the  total ;  when 
less  than  one-half  a  cent  they  will  be  disregarded. 
In  this  case  0.410  of  a  cent  is  less  than  one-half  a 
cent,  consequently  the  fraction  will  be  disregarded, 
making  the  final  figure  of  accrued  interest  sought 
$27.25.    The  note  is  worth  for  estate  taxes  $10,027.25. 

When  more  than  one  note  is  tendered  in  payment 
of  estate  taxes  each  note  will  be  computed  separ- 
ately, by  the  use  of  its  proper  table,  and  the  result 
stated  with  the  full  resulting  number  of  decimal 
places.  These  sums  will  then  be  added  together, 
and  the  adjustment  of  fractions  of  a  cent  applied  to 
the  total,  thus:  Supposing,  instead  of  one  note  of 
the  par  value  of  $10,000,  three  such  notes  were 
tendered,  the  result  would  be — 

First  note   $27.25410 

Second  note  27.25410 

Third  note 27.25410 

Total $81.76230 

In  this  case  the  fraction  of  a  cent  (0.230)  is  less 
than  one-half  a  cent,  consequently  the  accrued  in- 
terest is  $81.76,  and  the  notes  are  worth  for  estate 
taxes  $30,081.76. 


TREASURY  DECISIONS.  353 

T.  D.  2910,  2976,  3027,  3088. 

(T.  D.  2910) 

This  Treasury  Decision  promulgates  the  present 
Estate  Tax  Regulations. 


(T.  D.  2976) 
This  Treasury  Decision,  promulgated  February 
11,  1920,  contains  the  decision  of  the  United  States 
District  Court  for  the  Southern  District  of  New 
York  (Mack,  C.  J.)  in  New  York  Trust  Company  v. 
Eisner  (see  263  Fed.  Rep.  620). 


(T.  D.  3027) 
This    Treasury    Decision,    promulgated    June    2, 
1920,  contains  the  opinion  of  the  Circuit  Court  of 
Appeals  for  the  Third  Circuit  in  Lederer  v .  North- 
ern Trust  Company  (see  262  Fed.  Rep.  52). 


(T.  D.  3088) 

Estate  Tax — Decision  of  Court — Gross  Estate — Property  Pass- 
ing under  General  Power  op  Apponitment. 

Property  passing  under  general  power  of  appointment,  where 
the  construction  and  effect  of  the  power  and  the  rights  of  the 
parties  thereunder  are  governed  by  the  laws  of  Pennsylvania, 
should  not  be  included  in  the  gross  estate  of  the  decedent  exer- 
cising the  power  in  a  case  arising  under  Title  II  of  the  revenue 
act    of    1916. 


352  FEDERAL  ESTATE  TAX. 


T.  D.  3088. 


Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C. 
To  collectors  of  internal  revenue  and  others  con- 
cerned: 

The  appended  decision  of  the  United  States  Cir- 
cuit Court  of  Appeals  for  the  Third  Circuit  in  the 
case  of  Lederer,  collector  v.  Pearce,  executor,  is 
published  for  the  information  of  internal-revenue 
officers  and  others  concerned.  This  decision  is 
accepted  by  the  Treasury  Department  as  to  all  cases 
arising  under  Title  II  of  the  revenue  act  of  1916  in 
which  the  construction  and  effect  of  the  power  of 
appointment  and  the  rights  of  the  parties  there- 
under are  governed  by  the  laws  of  Pennsylvania. 
In  such  cases  the  appointed  property  will  not  be  in- 
cluded in  the  gross  estate  of  the  decedent  exercising 
the  power.  It  has  no  application  to  cases  arising 
under  Title  IV  of  the  revenue  act  of  1918.  T.  D. 
2477  of  April  7,  1917,  is  modified  accordingly. 

Wm.  M.  Williams, 
Commissioner  of  Internal  Revenue. 

Approved  October  30,  1920: 
D.  F.  Houston, 

Secretary  of  the  Treasury. 
(There  follows  the  opinion  of  the  Circuit  Court 
of  Appeals   for   the   Third   Circuit   in   Lederer   v. 
Pearce  [see  266  Fed.  Rep.  497].) 


in. 

FORMS. 

SIXTY-DAY  NOTICE  — ESTATE  OF  RESIDENT.* 

To  be  filed  in  duplicate  by  executor  or   person  in   possession   of   property. 
(Observe  instructions  on  reverse  side.) 

District   

Date  filed  

Name  of  decedent 

Dato  of  death 

Place  of  death 

Besidonce    

,19 

Collector  of  Internal  Revenue, 


1.  I, ,  pursuant  to  the  requirements  of 

section  404  of  the  Revenue  Act  of  1918,  approved  February  24,  1919,  hereby 
give  notice  that: 

(Fill  in  (a)  or  (b)  as  facts  warrant.) 

(a)  I  qualified  as  execut administrat of  the  estate  of  the 

above-named  decedent  in  the    Court 

at on  the day  of ,  19 ...  . 

(b)  I  had  actual  or  constructive  possession  of  property  or  an  interest  in 
property  which  constituted  a  part  of  the  gross  estate  of  the  above-named 
decedent  on  date  of  death,  or   I   came  into   possession  of  such   property  on 

the day  of ,  19.  .  .  .,  which  has  not  passed  into  the  charge 

of  an  executor  or  administrator.     The  description  and  approximate  value  of 
euch  property  at  the  time  of  death  were  as  follows : 

Description.  Value 


(Attach  schedule  if  more  space  is  required.) 

2.  To  the  best  of  my  knowledge  the  value  of  the  gross  estate  of  the  decedent 
exceeds  $50,000,  and  the  approximate  values  of  the  various  classes  of  property 
comprising  the  gross  estate  at  date  were  as  follows: 

Real  estate $ 

Stocks  and  bonds  

Miscellaneous  personalty 

Property  transferred  (see  Instructions  5  (c) )    

Property  owned  jointly 

Life  insurance  for  benefit  of  estate 

Other  life  insurance 


(Estimated  values  will  be  accepted.)  Total 

That  the  names  and  addresses  of  the  legal  representatives  of  the  esl  tto  ami 
their  attorneys  insofar  as  known  to  me  are : 

Name.  Address. 

Executors 
Administrators 


Attorneys  ) 

•This  is  Form  704  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Estate  Tux,  Form  704,  Revised  July. 
1919." 

[353] 


354  Federal,  Estate  Tax. 

I  hereby  certify  that  I  have  carefully  read  the  instructions  on  the  reverse 
side  of  this  form  and  that  all  the  statements  made  herein  are  correct  to  the 
best  of  my  knowledge  and  belief. 

Signature    

Designation 

(See  paragraph  2  of  instructions  on  back) 
Address 

Instructions. 

1.  Estates  subject  to  notice. —  This  notice  must  be  filed  for  the  estates  of  all 
resident  decedents,  the  gross  value  of  which,  as  defined  by  the  law,  exceeds 
$50,000. 

2.  Persons  required  to  file  notice. —  Where  an  executor  or  administrator  has 
been  appointed  by  court  decree,  he  must  file  the  notice,  which  must  contain  a 
statement  of  all  the  property  constituting  the  gross  estate  of  the  decedent. 
Except  as  hereinafter  mentioned,  all  persons  having  possession  of  any  property 
of  the  decedent  at  the  time  of  his  death,  or  acquiring  possession  thereafter, 
must  file  this  notice.  This  requirement  applies  to  agents,  bankers,  beneficiaries, 
brokers,  custodians,  debtors,  factors,  fiduciaries,  guardians,  joint  owners,  part- 
ners, safe-deposit  companies,  tansferees,  trustees,  warehouse  companies,  and 
all  other  persons  having  possession  of  property  constituting  part  of  the  gross 
estate  of  the  decedent.  Such  persons  are  relieved  of  the  duty  of  filing  notice 
only  where  the  executor  or  administrator  has,  within  the  time  prescribed,  filed 
a  notice  including  the  property  in  the  possession  of  such  persons.  In  case  of 
doubt,  the  notice  should  be  filed. 

,The  notice  may  be  executed  by  one  executor  or  administrator. 

3.  Time  for  filing  notice —  An  executor  or  administrator,  appointed  by  court 
decree,  must  file  the  notice  within  sixty  days  after  his  qualification.  Persons 
having  possession  of  the  property  of  the  decedent,  when  required  to  file  notice, 
must  file  the  same  within  sixty  days  after  receiving  information  of  the  de- 
cent's  death.  Where  possession  of  the  property  was  obtained  after  the 
decedent's  death,  the  notice  must  be  filed  within  sixty  days  after  taking 
possession. 

4.  Place  of  filing. —  This  notice  must  be  filed  with  the  Collector  of  Internal 
Revenue  for  the  district  of  which  the  decedent  was  a  resident  at  time  of  death. 

5.  Gross  estate. —  The  gross  estate  as  defined  by  section  402  of  the  Revenue 
Act  of  1918,  approved  February  24,  1919,  includes  — 

(a)  Property  which  after  decedent's  death  is  subject  to  payment  of 

charges,  to  expenses  of  administration,  and  to  distribution  as  a 
part  of  his  estate. 

(b)  Interest  of  surviving  spouse,  as  dower,  courtesy,  or  estate  in  lieu 

thereof. 

(c)  Property  transferred   or   placed   in   trust  in   contemplation   of,   or 

intended  to  take  effect  in  possession  or  enjoyment  at  or  after 
death. 

(d)  Property  held  jointly  or  as  tenants  in  the  entirety. 

(e)  Property  passing  under  a  general  power  of  appointment  exercised 

by  decedent. 

(f)  (1)  Insurance  payable  to  a  decelent's  estate,  his  personal  repre- 

sentatives, or  to  any  person  for  the  benefit  of  the  estate. 
(2)  Insurance  payable  to  beneficiaries,  in  excess  of  $40,000. 

6.  Lien, —  The  tax  is  a  lien  for  ten  years  upon  the  entire  gross  estate,  except 
such  part  of  it  as  is  used  for  the  payment  of  charges  against  the  estate  and 
expenses  of  its  administration  allowed  by  any  court  having  jurisdiction. 

7.  Penalties. —  The  penalty  for  knowingly  making  any  false  statement  in  this 
notice  is  a  fine  not  to  exceed  $5,000,  or  imprisonment,  or  both.  Penalty  for 
failure  to  file  notice  as  required  is  a  fine  not  to  exceed  $500,  and  cost  of  suit. 

8.  Delinquency. —  In  the  event  of  failure  to  file  this  notice  within  the  sixty 
days  prescribed  by  law,  a  detailed  explanation  under  oath  should  accompany 
notice  when  filed. 


Forms. 


355 


SIXTY-DAY   NOTICE   FOR   INSURANCE   COMPANIES  —  ESTATE    OP 

PFSIDF^-'i 
This  notice  must  be  filed  in  duplicate.     (Observe  instructions  on  n-vi-r.se  bJ      ,) 

District   

Date  filed  

Name  of  decedent 

Date  of  death   

Place  of  death  

Residence    

,19   

Collector  op  Internal  Revenue, 


1.  The  undersigned  insurance  company  organized  in  the  United  States,  pur- 
suant to  the  requirements  of  section  404  of  the  lievenuo  Act  of  1918,  approved 

February  24,  1919,  hereby  gives  notice  that  on  the day  of   , 

19.  . . .,  it  received  information  of  the  death  of  the  above-named  decedent  and 
that  the  facts  in  regard  to  insurance  issued  by  it  on  the  lifo  of  such  decedent 
are  correctly  set  forth  in  the  following  statement : 

Policy  Pace  Amount  To  whom 

No.  value.  payable.  payable.  Address. 


(Attach  schedule  if  more  space  is  required.) 

2.  That  the  records  of  this   company  indicate  that   the   decedent   had  life 
insurance  in  other  companies  or  organizations  as  follows : 

Company.  Address.  Amount  of  policy. 


3.  I  hereby  certify  that  I  have  carefully  read  the  instructions  on  the  reverse 
side  of  this  form  and  that  the  statements  made  herein  are  correct  to  the  best 
of  my  knowledge  and  belief. 

Company, 

By 

Address    


Instructions. 

1.  When  required. —  This  notice  is  required  whenever  an  insurance  company 
is  liable  to  make  payment  on  account  of  policies  issued  by  it  on  the  life  of  a 
resident  decedent  to  beneficiaries  other  than  the  executor  in  excess  of  $40,000, 
or  whenever  there  is  reason  to  believe  that  the  aggregate  of  such  insurance 
issued  by  it  and  all  other  companies  exceeds  $40,000.  "Whenever  there  is  doubt, 
the  notice  should  be  filed. 

2.  Time  of  filing. —  Notice  must  be  filed  within  sixty  days  from  the  date  the 
company  receives  information  of  the  death  of  the  insured  person. 

3.  Place  of  filing. —  This  notice  must  be  filed  with  the  Collector  of  Internal 
Revenue  of  the  district  in  which  the  decedent  had  his  residence  at  the  time  of 
death.  For  a  list  of  the  collection  districts,  see  appendix  in  Estate  Tax 
Regulations. 

4.  What  notice  should  contain. —  The  notice  should  contain  all  available  in- 
formation in  the  possession  of  the  company  executing  the  notice  as  to  insur- 
ance issued  by  it  or  any  other  company  on  the  life  of  the  decedent.  Notwith- 
standing that  notice  is  required  for  estates  of  resident  decedents  only  when  the 

*This  is  Form  787  and  contains  these  words  of  identification ;     Treasury 

Department,  U.  S.  Internal  Revenue,  Estate  Tax,  Form  787." 


356 


Federal  Estate  Tat. 


aggregate  insurance  payable  to  beneficiaries  other  than  the  executor  is  in 
excess  of  $40,000,  it  should  contain,  when  filed,  full  information  about  insur- 
ance payable  to  the  executor. 

5.  Lien. —  "Unless  the  tax  is  sooner  paid  in  full,  it  is  a  ben  upon  the  proceeds 
of  the  insurance  for  ten  years. 

6.  Penalties. —  The  penalty  for  knowingly  making  any  false  statement  in 
this  notice  is  a  fine  not  to  exceed  $5,000,  or  imprisonment,  or  both.  The  pen- 
alty for  failure  to  file  the  notice  as  required  is  a  fine  not  to  exceed  $500,  and 
costs  of  suit. 

7.  Delinquency. —  In  the  event  of  failure  to  file  this  notice  within  the  sixty 
days  prescribed  by  the  law,  a  detailed  explanation  under  oath  should  accompany 
the  notice  when  filed. 


SIXTY-DAY  JTOTICE  FOR  INSTJRARCE  COMPANIES  —  ESTATE   OF 
NONRESIDENT.* 

This  notice  must  be  filed  in  duplicate.     (Observe  instructions  on  reverse  side.) 

Name  of  decedent 

Date  of  death  

Place  of  death 

Residence    

,19 

Commissioner  op  Internal  Revenue, 

Estate  Tax  Division,  Treasury  Department, 
Washington,  D.  C. 
1.  The  undersigned  insurance  company  organized  in  the  United  States,  pur- 
suant to  the  requirements  of  section  404  of  the  Revenue  Act  of  1918,  approved 

February  24,  1919,  hereby  gives  notice  that  on  the day  of , 

19. . . .,  it  received  information  of  the  death  of  the  above-named  decedent  and 
that  the  facts  in  regard  to  insurance  issued  by  it  on  the  life  of  such  decedent 
are  correctly  set  forth  in  the  following  statement : 

Policy  Face  Amount  To  whom 

No.  value.         payable.  payable.  Address. 


(Attach  schedule  if  more  space  is  required.) 

2.  That  the  records  of  this  company  indicate  that  the  decedent  had  life 
insurance  in  other  companies  cr  organizations  as  follows : 

Company.  Address.  Amount  of  policy. 


3.  I  hereby  certify  that  I  have  carefully  read  the  instructions  on  the  reverse 
side  of  this  form  and  that  the  statements  made  herein  are  correct  to  the  beat 
of  my  knowledge  and  bebef. 

Company, 

By 

Address    


Instructions. 

1.  By  whom  notice  must  be  filed. —  This  notice  must  be  filed  by  every 
domestic  insurance  company  that  is  liable  to  make  payment  on  account  of 
policies  issued  by  it  on  the  life  of  a  person  dying  outside  the  United  States, 

*This  is  Form  788  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Estate  Tax,  Form  788." 


Forms.  357 


which  includes  the  States,  the  Territories  of  Alaska  and  Hawaii,  and  the  Dis- 
trict of  Columbia. 

2.  Time  of  filing. —  Notice  must  be  filed  within  Bixty  days  from  the  date  the 
company  receives  information  of  tho  death  of  tho  insured  person. 

3.  Place  of  filing. —  Notice  must  be  filed  with  the  Commissioner  of  Internal 
Eevenue,  Washington,  D.  C. 

4.  What  notice  should  contain. —  The  notice  should  contain  all  available  in- 
formation in  the  possession  of  the  company  executing  it  as  to  policies  of  insur- 
ance issued  by  it  or  any  other  company  or  organization  on  the  life  of  the 
decedent. 

5.  Liability  for  tax. —  Any  person  in  possession  of  property  which  consti- 
tutes a  part  of  tho  estate  of  a  nonresident  decedent  may  bo  held  personally 
liable  for  the  payment  of  the  estate  tax  in  tho  event  that  the  property  on 
which  the  tax  is  a  lien  is  removed  from  tho  jurisdiction  of  the  United  States 
before  the  tax  has  been  satisfied  or  provision  made  for  its  payment. 

6.  Lien. —  Unless  the  tax  is  sooner  paid  in  full,  it  is  a  lien  upon  the  proceeds 
of  the  insurance  for  ten  years. 

7.  Penalties. —  The  penalty  for  knowingly  making  any  false  statement  in 
this  notice  is  a  fine  not  to  exceed  $5,000,  or  imprisonment,  or  both.  The  pen- 
alty for  failure  to  file  the  notice  as  required  is  a  fine  not  to  exceed  $500,  and 
cost  of  suit. 

8.  Delinquency. —  In  the  event  of  failure  to  file  this  notice  within  the  sixty 
days  prescribed  by  the  law,  a  detailed  explanation  under  oath  should  accompany 
the  notice  when  filed. 

CLAIM  FOR  MILITARY  EXEMPTION  FROM  ESTATE  TAX.* 

T«  be  filed  in  duplicate.     (Read  instructions  on  reverse  side  before  executing 

this  application.) 

Collection  District 

Name  of  decedent Date  of  death 

Address 

Commissioner  of  Internal  Revenue, 
Washington,  D.  C. 

In  the  matter  of  the  a»bove  estate,  I  hereby  make  claim  for  exemption  from 
estate  tax,  in  accordance  with  the  provisions  of  section  401  of  the  Revenue  Act 
•f  1918,  basing  the  claim  upon  the  following  statement  of  facts: 

STATEMENT   OF    FACTS. 

Penalty  for  false  statement  in  connection  with  this  claim,  fine  of  $5,000  or 

imprisonment,  or  both. 

Exact  name  under  which  decedent  served 

Color Date  of  birth Place  of  birth 

Rank  and  organization,  including  company 

and  regiment  or  vessel  or  station 

Period  served  during  war  against  German  Government 

Date  and  place  of  discharge 

Nature  of  injury  or  disease  

When  and  where  received  or  contracted  

Cause  of  death 

Place  of  death 

State  whether  decedent  carried  War  Risk  Insurance, 

and  if  so,  give  insurance  certificate  number 

I  have  carefully  read  the  foregoing  statement  of  facts  and  I  do  hereby 
solemnly  swear  —  affirm  —  that  the  same  is  in  all  respects  true  to  the  best  of 
»y  knowledge,  information,  and  belief. 

Signature  

Designation   

Address 

"This  is  Form  793  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Iutcrnal  Revenue,  Form  793." 


358  Federal  Estate  Tax. 

Subscribed  and  sworn  to  before  me,  at this 

day  of  19 


(Signature  of  officer  administering  oath.)  (Title.) 

Instructions. 

1.  Purpose  of  claim. — This  claim  is  required  in  order  that  the  exemption  from 
estate  tax  provided  by  section  401  of  the  Kevenue  Act  of  1918  may  be  proved 
in  the  case  of  decedents  who  died  while  serving  in  the  military  or  naval  forces 
of  the  United  States  in  the  war  against  the  German  Government,  or  from 
injuries  received  or  disease  contracted  while  in  such  service  in  the  war  against 
the  German  Government,  and  who  left  estates  otherwise  subject  to  estate  tax. 
The  exemption  applies  to  all  persons  who  served  in  the  military  or  naval 
forces  as  defined  below  during  the  war  against  the  German  Government,  without 
regard  to  the  nature  of  the  duties  performed  or  the  place  at  which  stationed 
during  the  war. 

2.  Defi?iitions. —  The  term  ' '  military  or  naval  forces  of  the  United  States  ' ' 
includes  among  other  units  the  Marine  Corps,  the  Coast  Guard,  the  Army  Nurse 
Corps  (Female),  and  the  Navy  Nurse  Corps  (Female).  For  the  purpose  of  this 
exemption  the  date  of  the  termination  of  the  war  against  the  German  Govern- 
ment is  the  day  fixed  by  the  proclamation  of  the  President.  The  period  covered 
is  accordingly  from  April  6,  1917,  to  the  date  fixed  by  proclamation.  ( 

3.  Time  of  filing. —  This  claim  may  be  filed  at  any  time  within  one  year  after 
the  date  of  death,  but  should  be  filed  as  promptly  as  possible.  If  it  is  not 
possible  to  file  and  prove  the  claim  within  one  year,  return  on  Form  706  must 
be  filed  at  the  expiration  of  one  year  from  the  date  of  death. 

4.  Place  of  filing. —  The  claim  should  be  filed  with  the  Collector  of  Internal 
Revenue  of  the  district  in  which  the  decedent  had  his  permanent  residence  at 
the  time  of  death.  If  the  decedent  died  having  a  permanent  residence  outside 
the  United  States,  the  claim  should  be  filed  with  the  Commissioner  of  Internal 
Revenue. 

5.  Evidence  required. —  The  claim  should  be  accompanied  by  supporting  evi- 
dence. If  death  occurred  while  the  decedent  was  actually  in  the  military  or 
naval  forces,  the  claim  should  be  accompanied  by  the  certificate  of  The 
Adjutant  General  in  the  case  of  a  soldier,  or  by  the  Chief  of  the  Bureau  of 
Navigation  in  the  case  of  a  sailor,  or  of  The  Commandant  in  the  case  of  a 
marine,  evidencing  the  occurrence  of  death  while  in  the  service.  If  death 
occurred  after  discharge  from  the  service,  the  evidence  indicated  below  should 
be  submitted: 

(a)  Certificate  of  discharge  from  the  service  or  copy  of  such  certificate. 

(b)  Certified  copy  of  public  record  of  death. 

(c)  Affidavit  of  physician  who  attended  decedent  during  last  illneBS, 

setting  forth  the  medical  history  of  the  decedent  while  under  his 
treatment. 

(d)  Affidavits  or  other  evidence  to  show  that  death  resulted  from  injuries 

received  or  disease  contracted  while  serving  in  the  military  or 
naval  forces  of  the  United  States  during  the  war  against  the 
German  Government. 

6.  Sixty-day  notice  required. —  The  filing  of  the  claim  does  not  relieve  the 
executor  from  filing  sixty-day  notice.  In  cases  where  the  claim  can  be  completed 
within  the  sixty-day  period,  it  should  be  filed  with  the  notice. 

7.  Procedure. —  If  claim  on  review  is  approved,  the  Commissioner  will  notify 
claimant  to  that  effect,  and  no  return  need  be  filed.  If  the  claim  is  rejected, 
claimant  will  be  informed  and  return  required. 

t 
APPLICATION  FOR  RELEASE  OF  ESTATE  TAX  LIEN* 
(See  instructions  on  reverse  side.) 

Collection   District 

Name  of  decedent Date  of  death 

Residence 


*This  is  Form  791  and  contains  these  words  of  identification:     "Treasury 
Department,  U.  S.  Internal  Revenue,  Form  791." 


Forms.  359 

Commissioner  of  Internal  Revenux, 
Treasury  Department, 
Washington,  D.  C. 
In  accordance  with  section  409  of  t4ie  Revenue  Art  of  1918,  application  is 
hereby  made  for  the  issuance  (lf  g  certificate  releasing  the  estate  tax  lien  on 
the  following-described  property  belonging  to  or  forming  a  part  of  Hie  gross 
estate  of  tho  above-named  decedent: 

Description  of  property.  Present  value.        *  Basis  of  value. 


*  Whether  upon  personal  knowledge,  exert  appraisal,  or  sale. 

If  return  on  Form  706  has  not  been  filed,  Btate  tho  approximate  value  of 
property  comprising  gross  estate. 

Real  estate  $ 

Stock  and  bonds  issued  in  the  United  States $ 

Request  for  this  certificate  is  made  for  the  following  reasons: 

(Indicate  fully  why  certificate  is  desired.) 

If  property  is  to  be  sold  or  transferred,  give  the  name  and  address  of  the 
purchaser  or  transferee,  and  the  consideration  to  be  received : 

1  do  hereby  solemnly  swear  that  I  have  read  the  foregoing  application  and 
that  the  matters  and  things  therein  set  forth  are  true  to  the  best  of  my 
knowledge,  information,  and  belief. 

Name 

Designation  

Address 

Subscribed  and  sworn  to  before  me  this day  of ,  19.  .  . . 

(Signature  of  officer  administering  oath. )  (  Title. ) 

Instructions. 

1.  The  law. —  "That  unless  tho  tax  is  sooner  paid  in  full,  it  shall  bo  a  lien 
for  ten  years  upon  the  gross  estate  of  the  decedent,  except  that  such  part  of 
the  gross  estate  as  is  used  for  the  payment  of  charges  against  the  estate  and 
expenses  of  its  administration,  allowed  by  any  court  having  jurisdiction  thereof, 
shall  be  divested  of  such  lien.  If  the  Commissioner  is  satisfied  that  the  tax 
liability  of  an  estate  has  been  fully  discharged  or  provided  for,  he  may,  under 
regulations  prescribed  by  him  with  the  approval  of  the  Secretary,  issue  his 
certificate  releasing  any  or  all  property  of  such  estate  from  the  lien  herein 
imposed."     (Section  409,  Revenue  Act  of  1918.) 

2.  When  certificate  will  be  issued. —  Tho  certificate  will  be  issued  in  the  fol- 
lowing cases: 

(a)  Where  tho  tax  liability  has  been  fully  discharged. 

(b)  Where  the  tax  liability  has  not  been  fully  discharged  but  has  been 

duly  provided  for. 

3.  Necessity  for  certificate  must  be  shown. —  The  issuance  of  a  certificate  is 
a  matter  resting  within  the  discretion  of  tho  Commissioner  and  not  a  matter 
of  right  to  which  an  estate  is  entitled.  Tho  certificate  will  be  issued  only  in 
those  cases  where  actual  necessity  for  such  a  certificate  exists  and  can  be 
shown.  The  primary  purpose  of  this  certificate  is  not  to  evidence  payment  or 
satisfaction  of  tho  tax,  but  to  permit  the  transfer  of  property  free  from  lieu 


3G0  Federal  Estate  Tax. 

in  those  cases  where  it  is  essential  to  clear  title.     In  ordinary  cases  the  final 
receipt  issued  by  the  collector  will  constitute  sufficient  acquittance. 

4.  When  the  tax  liability  is  fully  disclmrged. —  The  tax  liability  of  an  estate 
is  fully  discharged  when  there  has  been  an  investigation  of  the  return  filed  by 
the  estate  and  all  tax  shown  due  on  the  return  or  by  the  investigation  has  been 
paid.  In  such  case,  the  certificate,  if  proper  necessity  exists,  will  be  issued 
on  the  filing  of  the  application  without  further  requirements. 

5.  Where  the  tax  liability  has  not  been  discharged. —  Where  the  tax  liability 
has  not  been  discharged  the  Commissioner  will,  in  his  discretion,  issue  his 
certificate  and  may  require  the  filing  of  a  corporate  indemnity  bond,  unless 
"United  States  Liberty  bonds  or  other  bonds  of  the  United  States  are  deposited. 
"Where  a  bond  is  required,  the  collector  will  notify  the  executor  of  the  amount, 
after  the  application  has  been  filed,  and  the  amount  fixed  by  the  Commissioner. 


FORM  FOR  EXECUTORS'  RETURN* 
To  be  Filed  in  Duplicate. 

Collection  District 
Date  Filed  


Audit  and  Claim 
Assessment  List.    Form  23A.         Additional  Tax  Assessed.                   Record. 
Additional  Tax,  $. .  .Paid. . .   Received 

(Month)                  (Year) 
Interest $ . .  .  Paid . .  .    Amount,    $....... 

(Page)  (Line) 

Gross  tax,  $ Paid Allowed,    $ 

Page Line Rejected,  $ 

Interest,  $ Paid By Date By Date 

Return  for  Federal  Estate  Tax. 

An  Itemized  Inventory  by  Schedule  of  the  Gross  Estate  of  the  Decedent, 
with  Legal  Deductions. 

Decedent 's  name  Date  of  death ,  19. . . . 

Residence  at  time  of  death 


General,  Instructions  —  Read  -with  Care. 

1.  Penalties. —  For  failure  to  file  return  when  due,  a  fine  not  exceeding  $500, 
or  25  per  cent  added  to  the  tax,  or  both.  For  knowingly  making  a  false  state- 
ment in  this  return,  a  fine  not  exceeding  $5,000,  or  imprisonment,  or  50  per 
eent  added  to  the  tax,  or  any  or  all  of  the  three. 

2.  This  return  is  required  for  the  estate  of  every  resident  decedent  whose 
gross  estate  exceeds  $50,000,  and  for  the  estate  of  every  nonresident  decedent 
any  part  of  whose  gross  estate  is  situated  in  the  United  States.  The  term 
' '  United  States  ' '  used  in  this  form  means  only  the  States,  the  Territories  of 
Alaska  and  Hawaii,  and  the  District  of  Columbia. 

3.  This  return  is  due  one  year  after  the  date  of  death,  and  must  be  filed  with 
the  collector  of  the  district  in  which  the  decedent  had  his  permanent  residence 
at  the  time  of  death,  or,  in  the  case  of  a  nonresident,  with  the  Commissioner  of 
Internal  Revenue,  Treasury  Department,  Washington,  D.  C. 

4.  Regulations  No.  37,  Revised,  1919,  should  be  carefully  studied  before  mak- 
ing out  this  return. 

5.  All  papers  used  in  preparing  the  return  should  be  carefully  preserved  foi 
reference  or  inspection.  All  estate  tax  returns  are  verified  by  an  internal- 
revenue  officer  before  the  tax  is  determined  by  the  Bureau. 

•This  is  Form  706  and  contains  these  words  of  identification:     "Treasury 
Department,  U.   S.   Internal  Revenue,  Form  706,  Revised  November,   1919." 


Foicms.  3G1 


8.  If  the  decedent  Ifft  a  will,  a  certified  copy  must  be  filed  in  duplicate 
with  the  return. 

There  should  be  filed  in  duplicate  and  as  B  part  <>f  tlie  return  such  supple- 
mental data  and  statements  as  may  be  necessary  to  substantiate  the  return  and 
establish  the  correct  tax. 

In  the  case  of  the  estate  of  a  nonresident,  there  should  be  filed — 

(1)  Certified  copy  of  will,  if  decedent  died  testate,  or  of  each   will  if 

decedent  left  more  than  one,  to  govern  in  different  jurisdictions. 

(2)  A  certified  copy  of  inventory  of  the  complete  gross  estate,  whether 

situated  within  or  without  the  United  .States.  Separate  seh<>dules 
should  be  made  for  property  within  and  without  the  Inited 
States  respectively. 

(3)  If  any  deduction  is  claimed,  a  certified  copy  of  schedule  of  debta 

and  expenses  allowed. 

7.  Thi9  form  consists  of  cover  sheets,  general  infomation  sheet,  and  thirteen 
schedules.  Care  should  be  taken  to  see  that  the  return  is  filed  complete  and 
that  all  schedules  are  included  in  the  proper  order. 

The  inventory  of  the  gross  estate  must  be  set  forth  upon  the  schedules  pro- 
vided, and  may  not  be  attached  in  the  form  of  an  exhibit. 

8.  The  questions  asked  under  each  schedule  should  bo  specifically  answered, 
and  if  the  decedent  owned  no  property  of  any  class  specified  under  the  schedule, 
the  word  "None"  should  be  written  across  the  schedule. 

9.  If  there  is  not  sufficient  space  for  all  entries  under  any  schedule,  use 
additional  sheets  of  the  same  size,  numbering  them  consecutively  as  follows: 
Schedule  A-l,  A-2.  etc.,  and  insert  them  in  the  proper  order  in  the  return. 

10.  Any  property  owned  jointly  or  as  tenants  in  the  entirety,  should  be  en- 
tered under  the  schedule  for  the  particular  kind  of  property  involved,  with  a 
statement  of  the  origin,  nature  and  extent  of  the  interest.  Jointly  owned 
real  estate,  for  example,  should  be  entered  on  Schedule  A. 

11.  Where  decedent  died  subsequent  to  February  24,  1919,  property  identi- 
fied as  received  from  an  estate  taxed  within  five  years,  and  subsequent  to 
October  3,  1917,  or  identified  as  exchanged  for  such  property,  must  be  en- 
tered in  Schedule  G  exclusively  and  not  under  any  other  schedule,  whether 
real  estate  or  other  property. 

12.  Further  instructions  will  bo  found  under  each  schedule.     Returns  not  in 
accordance  with  the  instructions  upon  this  form  will  not  be  accepted. 
Estate  of District  of 

General  Information  Sheet.  » 

The  information  called  for  on  this  page  is  necessary  for  purposes  of  record 

and  verification.     Fill  out  all  blanks  carefully. 

The  name  of  the  decedent's   legal  heirs  and  next  of  kin   required  whether 

the  decedent  left  a  will  or  not.     Tf  the  will  names  more  than   ten,  only  the 

names  of  the  ten  principal  beneficiaries  are  required. 

State  whether  decedent  died  testate  or  intestate 

( Answer. ) 

Permanent  residence  at  time  of  death 

Actual  place  of  death Age  at  death 

Business  or  employment 

Business  address 

HEIRS   AT   LAW,   LEGATEES,    AM)   BENKFIOARIES. 

Name.  Relationship.  Address. 


(If  more  space  is  needed,  insert  additional  sheets 


of  the  same  size.) 


3G2 


Fedekal,  Estate  Tax. 


Estate  op District  or 

Schedule  A. 
Real  Estate. 

INSTRUCTIONS. 

Real  estate  should  be  so  described  that  it  may  be  readily  located.  The  legal 
description  is  not  required  unless  necessary  to  show  the  exact  location.  The 
character  of  the  buildings  should  be  stated  and  the  character  and  area  of 
unimproved  land.    For  location,  such  details  as  the  following  may  be  necessary : 

City  or  town  property. —  Street  and  number,  ward,  map  or  subdivision,  block 
and  lot,  etc. 

Bural  property. —  County,  township,  range,  block  and  lot,  street,  landmarks, 
etc. 

If  any  item  of  real  estate  is  subject  to  mortgage,  the  unpaid  balance  of  the 
mortgage  should  be  shown  under  "  Description."  The  full  value  of  the 
property  and  not  the  equity  must  be  extended  in  the  value  column.  The  mort- 
gage must  be  deducted  under  Schedule  J  of  this  return. 

All  rents  accrued  and  unpaid  should  be  apportioned  to  the  date  of  death 
whether  due  at  that  time  or  not. 

For  further  instructions  see  Article  13  et  seq.,  Regulations  No.  37,  Revised, 
1919. 

Did  the  decedent,  at  the  time  of  death,  own  any  real  estate?     (Answer  ' '  Yea" 

or  "  No.")   

Assessed  Actual 

value  for  value  on 

year  of  day  of 

Item                                                                  decedent's  decedent's        Accrued 

No.             Description  of  real  estate.                death.  death.              rents. 


Total. 


Grand  total 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  or District  or 

Schedule  B. 
Stocks  and  Bonds. 

instructions. 

Give  a  complete  and  adequate  description  of  all  securities,  as  follows: 
Stocks. —  State  the  number  of  shares,  exact  title  of  corporation,  common  or 
preferred,  par  value,  and  quotation  at  whicli  returned.     If  a  listed  security, 
state  principal  exchange  upon  which  sold.    If  unlisted,  show  the  address  of  the 
issuing  company. 

Examples:   10  shares  American  Car  &  Foundry  Co.,  preferred,  par  $100, 
at  98,  New  York  Exchange. 
10  shares  Eagle  Manufacturing  Co.,  Red  Bank.,  N.  J.,  com- 
mon, par  $25,  at  30,  unlisted. 


Forms.  3C3 

Bonds. — State  quantity  and  denomination,  exact  title,  kind  of  bond,  inl 
rate,  and  due  dates.     State  the  exchange  upon  which  lintel  or  the  address  of 
company,  if  unlisted. 

Example:  Ten  $1,000  Baltimore  &  Ohio  Railway  Co.  first  mortgage  4 
per  cent  registered  50-year  gold  bonds,  due  1948,  January, 
April,  July,  ami  October,  at  96,  New  York  Exehi 

Listed  stocks  and  bonds  should  bo  returned  at  the  mean  between  the  high  and 
low  sale  prices  on  the-  day  of  death;  if  there  was  no  sale  on  the  day  of  death, 
the  nearest  sale  price,  either  before  or  after  death,  and  within  a  reasonable 
period  thereof,  should  bo.  taken. 

Unlisted  securities  which  are  actively  dealt  in  should  bo  appraised  upon  tln> 
basis  of  last  sales  prior  to  death.     The  source  of  the  quotation  should  be  stated. 

Inactive  stock  and  stock  in  close  corporations  should  bo  appraised  upon  tho 
basis  of  net  assets  of  the  company  at  the  time  of  death  and  its  earning  capacity 
during  the  five  preceding  years.  If  such  stock  forms  a  material  part  of  tho 
estate  there  must  be  submitted  copies  of  statement  of  assets  and  liabilities  as 
of  tho  date  of  death  and  for  each  of  tho  five  years  preceding  death,  and  a  state- 
ment of  net  earnings  per  year  for  the  same  period. 

Securities  returned  as  of  no  value,  nominal  value,  or  obsolete  should  be  listed 
last,  and  the  address  of  the  company  and  tho  State  and  date  of  incorporation 
should  be  stated,  if  obtainable  from  tho  certificate.  Copies  of  correspondence 
or  statements  of  reasons  for  return  at  no  value  should  be  retained  for 
inspection. 

Interest  on  bonds  should  be  apportioned  to  the  death  computed  upon  the 
basis  of  3G0  days  to  the  year  and  returned  in  interest  column.  Dividends  upon 
stock  declared  prior  todeath.  and  payable  after  date  of  death,  must  bo  re- 
turned separately  unless  reflected  in  the  price  at  which  the  stock  is  returned. 

In  nonresident  estates  the  actual  depository  on  date  of  death  on  all  bonds 
should  be  shown. 

For  further  instructions  see  Article  15  et  seq.,  Regulations  No.  37,  Revised, 
1919. 

Did  the  decedent  own  any  stocks  or  bonds?     (Answer  "  Yes  "  or  "  No.") 


Item  Value  on  Interest  or 

No.  Description.  day  of  death.         dividends. 


Total $. 

Grand  total 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  or District  of  . 

Schedule  C. 
Mortgages,  Notes,  Cash,  and  Insurance. 

INSTRUCTIONS. 


The  four  classes  of  property  on  this  schedule  should  bo  listed  separately  in 
the  order  given. 

Mortgages. —  State  (1)  face  value  and  unpaid  balance,  (2)  date  of  mortgage, 
(3)  name  of  maker,  (4)  property  mortgaged,  (5)  interest  dates  and  rate  of 
interest.  For  example:  Bond  and  mortgage  for  $5,000,  unpaid  balance  $5,000; 
dated  January   1,   1910,  John  Doe  to  Richard  Roe;   premises  22  Clinton   St., 


3G4 


Federal  Estate  Tax. 


Newark,  N.  J. ;  interest  payable  at  6  per  cent  per  annum  January  1  and  Jury  1 ; 
interest  paid  to  January  1,  1912. 

Notes,  promissory. —  Give  similar  data. 

Cash  in  possession. —  List  separately  from  bank  deposits. 

Cash  in  bank. —  Name  bank  and  amount  in  each  bank  and  give  serial  number 
of  account.  Include  accrued  interest  in  income  column,  or  indicate  if  included 
in  total  on  deposit. 

Insurance. —  The  proceeds  of  all  life  insurance  to  whomsoever  payable  must 
be  returned  regardless  of  value.  Insurance  payable  to  executor  must  be 
returned  first.  State  (1)  name  of  company,  (2)  number  of  policy,  (3)  name 
of  person  receiving  insurance.     Include  full  amount  received. 

Important. —  If  there  is  insurance  payable  to  beneficiaries  other  than  the 
executor,  deduction  may  be  taken  at  bottom  of  this  page  equal  to  the  amount 
returned  for  such  insurance,  but  not  exceeding  $40,000. 

For  further  instructions  see  Article  34  et  seq.,  ^Regulations  No.  37,  Eevised, 
1919. 

1.  Did  the  decedent,  at  the  time  of  his  death,  own  any  mortgages,  notes,  or 

cash?     (Answer  "  Yes  "  or  "  No.")   

2.  Was   any   insurance   payable   on   life   of   decedent   to   executor?     (Answer 

11  Yes  "  or  "  No.")    

3.  "Was  any  insurance  payable  on  life  of  decedent  to  beneficiaries  other  than 

executor?     (Answer  ' '  Yes  "  or  "  No. ")    

Income 
Item.  Value  on  accrued  to 

No.  Description.  day  of  death,      date  of  death. 


Less  amount  of  insurance  payable  to  ben- 
eficiaries other  than  the  executor  not 
in  excess  of  $40,000 


Total  taxable 


•  •  *  • 


Grand  total 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  of District  of ^. .... 

Schedule  D. 
Other  Miscellaneous  Property. 

instructions. 

Under  this  schedule  include  all  items  of  gross  estate  not  returned  under 
another  schedule,  including  the  following:  Debts  due  the  decedent;  interests  in 
business;  claims,  rights,  royalties,  and  pensions;  leases^  judgments,  choses  in 
action,  shares  in  estates  of  decedents  or  trust  funds;  transfer  value  of  fire  and 
other  protective  insurance;  household  goods  and  personal  effects,  including 
wearing  apparel;  farm  products  and  growing  crops;  live  stock,  automobiles,  etc 

When  an  interest  in  a  copartnership  or  unincorporated  business  is  returned, 
submit  in  duplicate  statement  of  assets  and  liabilities  as  of  date  of  death  and 
for  the  five  years  preceding  death,  and  statement  of  the  net  earnings  for  th* 
same  five  years.    Good  will  must  be  accounted  for. 

In  listing  automobiles  give  make,  model,  and  year. 


Forms.  365 


Did  the  decedent,  at  the  time  of  his  death,  own  any  interest  in  a  copartnership 
or  unincorporated  business?     (Answer  "  Yes  "  or  "  No.") 

Did  the  decedent,  at  the  time  of  his  death,  own  any  miscellaneous  property  not 
returnable  under  any  other  schedule?     (Answer  ' '  Yes  "  or  "  No. ") 

Item  Value  on  Accrued 

No.  Description.  day  of  death.  income. 


Total. 


Grand  total 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Ectate  or District  of : 

Schedule  E. 
Transfers. 

INSTRUCTIONS. 

All  gifts  and  transfers,  including  trusts,  of  a  material  part  of  the  estate, 
made  or  executed  by  the  decedent  within  two  years  prior  to  the  date  of  death, 
other  than  by  a  bona  fide  sale,  for  a  fair  consideration  in  money  or  money 's 
worth,  must  be  returned  under  this  schedule  and  the  value  of  the  property  shown 
in  the  first  column.  The  value  must  also  be  extended  into  the  second  column 
for  inclusion  in  the  gross  estate  unless  the  executor  has  clear  evidence  to  show 
that  the  transfers  in  question  were  not  in  fact  made  in  contemplation  of  death. 

All  gifts  and  transfers  made  in  contemplation  of  death  or  to  take  effect  at 
or  after  death  without  such  consideration,  are  taxable  and  must  be  included  in 
the  gross  estate  regardless  of  the  date  of  transfer.  All  transfers  of  a  material 
part  of  the  decedent's  estate  made  more  than  two  years  prior  to  death  must  be 
returned  under  this  schedule,  but  the  value  need  not  be  extended  into  the  sec- 
ond column  if  the  executor  desires  to  contend  that  the  transfers  were  not  made 
in  contemplation  of  death. 

In  all  cases  where  a  transfer  or  gift  is  listed  under  this  schedule,  but  the 
value  not  e«tended  into  the  second  column  for  inclusion  in  the  gross  estate,  the 
executor  is  required  to  submit  as  a  part  of  the  return  documentary  evidence  in 
the  form  of  affidavits  fully  setting  forth  all  the  facts  and  circumstances  indi- 
cating the  intent  of  the  decedent  in  making  the  transfer. 

Where  the  transfer  was  effected  by  deed  of  trust,  copy  of  such  instrument 
should  be  filed  in  duplicate. 

Make  full  entry,  giving  name  of  transferee,  date  and  form  of  transfer, 
description  of  property,  and  value  at  time  of  death. 

For  further  instructions  see  Article  22  et  seq.,  Regulations  No.  37,  Revised, 
1919. 

1.  Did  the  decedent,  during  the  period  within  two  years  prior  to  death,  make 

any  transfer  of  a  material  portion  of  his  estate  in  the  nature  of  a  final 
disposition  or  distribution  thereof  without  a  fair  consideration  in  money 
or  money's  worth?     (Answer  "  Yes  "  or  "  No.")   

2.  Did  the  decedent,  at  any  time  prior  to  two  years  before  his  death,  make  any 

transfer  or  create  any  trust  in  contemplation  of  or  intended  to  take  effect 
at  or  after  death  without  consideration?     (Answer  "  Yes  "  or  "  No.") 

24 


3G6 


Federal,  Estate  Tax. 


Did  the  decedent,  at  any  time,  make  a  transfer  of  a  material  portion  of  hia 
estate  without  consideration,  but  not  believed  to  be  in  contemplation  of 
death  or  intended  to  take  effect  at  or  after  death?  (Answer  "  Yes  "  or 
No.")   

What  trusts,  if  any,  created  by  the  decedent,  were  in  existence  at  the  time  of 
his  death  ? 


Item 

No 


Details  of  transfer. 


Value  on 
day  of  death. 


Value  to  be 
included  in 
gross  estate. 


Total. 


Grand  total |  $ . . . 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  or District  of 

Schedule  F. 
Powers  of  Appointment. 

INSTRUCTIONS. 

Property  passing  under  a  general  power  of  appointment  exercised  in  the 
decedent's  will  must  be  returned.  If  the  decedent  exercised  a  general  power 
by  deed,  the  property  must  be  included  in  the  gross  estate  if  the  deed  was  made 
in  contemplation  of  death  or  intended  to  take  effect  at  or  after  death,  except 
where  executed  for  a  fair  consideration  in  money  or  money 's  worth. 

Certified  copy,  in  duplicate,  of  the  will  or  deed  conferring  the  power  upon  the 
decedent,  and  of  the  instrument  by  which  the  power  was  exercised,  must  be 
filed  with  the  return. 

Property  passing  under  the  exercise  of  a  power  of  appointment  should  not 
be  listed  under  any  other  schedule. 

For  further  instructions  see  Article  30  et  seq.,  Regulations  No.  37,  Revised, 
1919. 

1.  Did  the  decedent,  at  any  time,  by  will  or  otherwise,  transfer  property  by  the 

exercise    of    a    general    power    of    appointment?     (Answer    "Yes"    or 
"  No.")   

2.  Did  the  decedent,  at  any  time,  by  will  or  otherwise,  exercise  a  limited  power 

of  apointment?      (Answer  "Yes"  or  "No.")    .... 


Item 
No. 


Description  and  details. 


Value  on 
day  of  death. 


Accrued 
income. 


Total. 


Grand  total 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


FoBM8. 


307 


S6TATK  Or 


District  or 


Schedule  G. 


Property  Identified  as  Taxed  Within  5  Years. 


(Taxed  under  Act  of  October  3,  1917,  or  Revenue  Act  of  1918.) 
INSTRUCTIONS. 

Before  executing  this  schedule  read  carefully  Articles  50  et  seq.  and  62, 
wider  Kegulations  No.  37,  Revised,  1919. 

Property  identified  as  received  from  an  estate  taxed  within  five  years,  or 
acquired  in  exchange  for  such  property,  must  be  included  in  this  schedule  and 
deduction  taken  under  Schedule  K.  In  order  to  be  entitled  to  this  exemption, 
the  first  decedent  must  have  died  subsequent  to  October  3,  1917,  and  the  second 
decedent  must  have  died  on  or  after  February  25,  1919.  The  exemption  is  lim- 
ited to  the  identical  property  received  or  property  identified  as  acquired  by 
first  exchange  of  such  property.  No  exemption  is  permitted  for  property 
acquired  by  a  second  or  subsequent  exchange. 

If  property  identified  as  acquired  by  first  exchange  is  listed,  it  must  be  listed 
in  such  manner  as  to  indicate  that  fact  and  to  show  the  original  property 
/eceived  from  the  first  estate. 

If  property  is  acquired  by  exchange,  the  full  value  of  the  property  must  be 
entered  in  this  schedule  and  carried  forward  to  the  recapitulation  of  the  gross 
estate,  even  though  the  present  decedent  gave  additional  valuable  consideratiou 
over  and  above  the  value  of  the  property  given  in  the  exchange.  In  such  cases 
there  should  be  deducted  in  the  space  provided  below  the  proportion  of  the 
present  value  of  the  property  received  in  exchange  that  the  additional  consid- 
eration bore  to  the  entire  consideration  given.  For  example:  An  item  of 
property  valued  at  $10,000  is  exchanged  for  an  item  of  property  valued  at 
$15,000,  $5,000  additional  being  given  by  the  decedent.  The  full  value  of  the 
property  received  in  exchange  should  be  listed  in  this  schedule,  but  one-third 
of  the  present  value  should  be  deducted  in  the  space  below  before  the  total  is 
carried  forward  to  Schedule  K  as  a  deduction. 

Unless  property  can  be  clearly  identified,  the  deduction  can  not  be  taken. 
The  burden  of  proof  rests  upon  the  person  claiming  the  deduction. 

If  property  of  this  nature  has  been  received  from  more  than  one  estate,  give 
separate  statements  for  each  estate,  repeating  the  heading  given  below : 

Estate  or  Prior  Decedent. 

X;ime  of  decedent Date  of  death 

Residence  at  time  of  death 

Name  and  address  of  administrator  or  executor   


Return  filed  with  collector  at 

Item 
No.  Description  of  property. 


Value  on 
day  of  death. 


Accrued 
income. 


Total   to   be   included   in   the    gross 

estate  

Less  proportion  of  present  value  of  prop- 
erty acquired  by  exchange  representing 
proportion  of  additional  consideration 
given  (see  above)   

Total  to  be  taken  as  deduction    (see 
Schedule  K )   


I 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


:?08 


Federal  Estate  Tax. 


Estate  of District  of 


Schedule  H. 
Funeral  Expenses  and  Administration  Expenses. 

INSTRUCTIONS. 

Funeral  expenses  and  miscellaneous  administration  expenses  should  be  item- 
ized. Give  name  of  creditor  and  exact  nature  of  expense.  Preserve  all  vouchers 
and  receipts  for  inspection. 

No  deduction  may  be  taken  upon  the  basis  of  a  vague  or  uncertain  estimate, 
but  a  close  estimate  is  deductible.  Where  the  amount  is  estimated,  indicate 
that  fact. 

Executors'  or  administrators'  commissions  may  be  estimated,  provided  that 
the  commissions  will  be  awarded  by  the  court  of  probate  jurisdiction  or  allowed 
in  a  probate  account  and  will  be  paid. 

Attorneys'  fees  should  be  entered  in  the  exact  amount  paid  or  to  be  paid. 
In  the  absence  of  an  award  by  the  court,  this  item  is  not  deductible  in  these 
States  where  the  fee  is  a  charge  against  the  executor  and  not  against  the  estate. 

Estate,  legacy,  succession,  and  inheritance  taxes,  a»d  taxes  on  income  accrued 
after  death,  are  not  deductible. 

For  further  instructions  see  Articles  37  et  seq.  and  59  et  seq.,  Regulations 
No.  37,  Revised,  1919. 


Item 

No. 


Amount 
of  item. 


Totals. 


Funeral  expenses 


Total  funeral  expenses 

Executor 's  commission 

Attorney 's  fee 

Miscellaneous  administration  expenses.  . . 

Total  miscellaneous  expenses 


Total. 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  of District  of 

Schedule  I. 
Debts  of  Decedent. 

INSTKUCTIONS. 

Itemize  fully  below  all  valid  debts  of  the  decedent  due  and  owing  at  the  time 
of  death.     Preserve  all  vouchers  for  inspection. 

If  deduction  is  claimed  for  a  debt,  the  amount  of  which  is  disputed  or  the 
subject  of  litigation,  only  such  amount  may  be  deducted  as  the  estate  concedes 
to  be  a  valid  claim.  The  fact  of  litigation  should  be  stated.  If  any  debt  has 
been  canceled  by  the  creditor,  no  deduction  may  be  taken. 

Enter  notes  unsecured  by  mortgage  under  this  heading  and  give  full  details, 
including  name  of  payee,  face  and  unpaid  balance,  date  and  term  of  note, 
interest  rates  and  date  to  which  interest  was  paid  prior  to  death. 

Care  must  be  taken  to  state  the  exact  nature  of  the  claim  as  well  as  the  name 
of  the  creditor.     If  the  claim  is  for  services  rendered  over  a  period  of  time, 


Forms. 


309 


etate  the  period  covered  by  the  claim.     Example:  January  1,  1919,  Edison  Elec- 
tric Illuminating  Company,  for  electric  service  during  December,  1918,  $25. 

Item 
No.      Date  of  claim.  Creditor  and  nature  of  claim.  Amount. 

I   $ 


Total I  $ .  .  . 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.  I 


Estate  of District  of 


Schedule  J. 

Mortgages,  Net  Losses,  and  Support  of  Dependents. 

instructions. 

Mortgages. —  Give  location  of  property,  name  of  mortgagee,  date  and  term 
of  mortgage,  amount  and  unpaid  balance,  rate  of  interest,  date  to  which  interest 
was  paid  prior  to  death.  Enter  in  second  column  accrued  interest  apportioned 
to  date  of  death.     Unsecured  no+es  should  be  listed  under  Schedule  I. 

Losses. —  Losses  are  strictly  limited  to  net  losses  arising  from  fire,  storm, 
shipwreck,  or  other  casualty,  or  from  theft  to  the  extent  that  such  losses  are 
not  compensated  for  by  insurance.  Losses  must  occur  during  the  settlement 
of  the  estate.  Depreciation  in  the  value  of  securities  does  not  constitute  a 
deductible  loss.  In  listing  losses,  specify  nature.  If  insurance  was  received 
on  account  of  loss,  state  the  amount  collected. 

Support  of  dependents. —  No  deduction  may  be  taken  under  this  item  unless 
the  local  law  permits  the  allowance,  the  local  court  has  made  a  decree  specifying 
the  amount  thereof,  and  in  fact  the  allowance  was  reasonably  required  for  the 
support  of  the  person  in  question.  In  listing  this  item,  give  the  names  of  the 
dependents  and  their  relationship. 

For  further  instructions  see  Article  47  et  seq.  and  61,  Eegulations  No.  37, 
Eevised,  1919. 


Item 
No 


Mortgages. 


Amount. 


Accrued 
interest. 


Total 


Grand  total 

(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Item 

No 


Net  losses  during  administration. 


Amount. 


Total 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


370 


Item 
No 


Federal  Estate  Tax. 

Support  of  dependents. 


Amount. 


Total 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Estate  op District  op 

Schedule  E. 
Property  Identified  as  Taxed  Within  Five  Years. 

INSTRUCTIONS. 

Enter  in  this  schedule,  by  separate  estates  if  more  than  one  estate  is  involved, 
the  total  amount  deductible  as  representing  property  received  from  an  estate 
taxed  within  five  years  or  acquired  by  exchange  for  property  so  received,  as 
set  forth  in  Schedule  G. 

Important. —  Care  must  be  observed  to  enter  in  this  schedule  only  the  present 
value  of  the  property  actually  received,  or  if  such  property  has  been  exchanged 
for  other  property,  the  present  value  of  such  other  property.  Where  the 
exchange  was  equal,  the  full  present  value  should  be  entered.  Where  the 
decedent  in  acquiring  such  other  property  gave  additional  consideration,  there 
should  be  deducted  such  proportion  of  the  present  value  of  the  property 
acquired  in  exchange  as  the  value  of  the  original  property  bore  to  the  entire 
consideration  given. 

For  further  instructions  see  Article  50  et  seq.  and  62,  Regulations  No.  37, 
Revised,  1919. 

Item  Name  of 

No.  prior  decedent.  Address.  Date  of  death.         Amount. 

$ 


Total. 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 
Charitable,  Public,  and  Similar  Gifts  and  Bequests. 
When  a  deduction  is  claimed  under  this  schedule,  there  must  be  submitted 
(1)  certified  copy  of  will  or  instrument  of  gift,  (2)  receipt  or  statement  show- 
ing payment  or  acceptance,  (3)  affidavit  of  executor,  showing  whether  will  has 
been  or  will  be  contested,  (4)  such  other  document  or  evidence  as  may  be 
specified  by  the  Bureau. 

For  further  instructions  see  Artic'e  53  et  seq.  and  63,  Regulations  No.  37, 
Revised,  1919. 

Item  Character  of 

No.  Name  and  address  of  beneficiary.  institution.  Amount. 


Total 


(If  more  space  is  needed,  insert  additional  sheets  of  same  size.) 


Forms. 


371 


Sched- 
ule. 

A 
B 
C 
D 
E 
P 
O 


Schedule  L. 
Recapitulation,  Bates  of  Tax  and  Tax  Due,  and  Jurat. 

Gross  estate.  Value. 


Real  estate  

Stocks  and  bonds  

Mortgages,  notes,  cash,  and  insurance 

Other  miscellaneous  property   

Transfers  

Powers  of  appointment  

Property  identified  as  taxed  within  five  years. 


Total  gross  estate $ 


*. 


Sched- 
ule. 

H 


K 


Deductions. 


Amount. 


Tuneral  expenses 

Administration  expenses : 

Executor 's  fee 

Attorney 's  fee 

Miscellaneous  

Debts  of  decedent 

Unpaid  mortgages 

Net  losses  during  settlement 

Support  of  dependents 

Property  identified  as  taxed  within  five  years. 

Charitable,  public,  and  similar  bequests 

Specific  exemption  (resident  decedents  only) . 

Total  deductions 


Total  gross  estate  (within  U.  S.  in  nonresident  estates) 
Total  deductions   (for  nonresident,  see  Schedule  M)  .  . 


Net  estate  for  tax |  $ 

Schedule  M. 

Deductions  —  Estate   of  Nonresident. 
If  the  decedent  was  not  a  resident  of  the  United  States,  Hawaii,  or 
no   deductions   whatever   are  allowable   unless   the  value   of  that   part 
gross  estate  situated  outside  of  the  United  States.  Hawaii    or   Ala-k  i 
forth.     If  it  be  desired  to  claim   deductions,  execute  Schedules  H-I-J 
compute  the  deductions  allowable  as   follows; 

1.  Value  of  gross  estate  in  United  States    (Schedules 

A-B-C-D-E-F-G) $. 

2.  Value  of  gross  estate  outside  of  the  United  States 

(attach  itemized  schedule  showing  values) 

3.  Value   of  total   gross   estate   wherever   situated    ( 1 

plus  2) 

4.  Gross  deductions  under  Schedules  H-I-J 

5.  Net  deductions  under  Schedules  IT-T-.T   (that  propor- 

tion of  4  that  1  bears  to  3,  not  exceeding  10%  of  1 ) 

6.  Schedule  K    (within  the  United   States) 

7.  Total  deductions  allowable    (5  plus  6) 

8.  Net  estate  taxable   ( 1  minus  7 ) 


Alaska, 
of  his 
be  set 
K  and 


372 


Federal  Estate  Tax. 


Rates  and  Tax  Due. 


Date  of  deatl 

(Date.) 

O) 

(2) 

(3) 

Sept.  9, 

Mar.  3, 

Oct.  4, 

(4) 

1916, to 

1917, to 

1917, to 

On  and 

Mar.  2, 

Oct.  3, 

Feb.  24, 

after 

1917, 

1917, 

1919, 

Feb.  25, 

Net  estate. 

inclusive,  inclusive,  inclusive. 

1919. 

Exceed-       Not  ex-     Amount 

Eate 

Kate 

Eate 

Bate 

Amount 

ing —      ceeding —  of  block. 

per  cent. 

per  cent. 

per  cent. 

per  cent. 

of  tax. 

$50,000 

$50,000 

1 

1% 

2 

1        1 

$ 

$50,000 

150,000 

100,000 

o 

3 

4 

2 

150,000 

250,000 

100,000 

3 

4% 

6 

3 

250,000 

450,000 

200,000 

4 

6 

8 

4 

450,000 

750,000 

300,000 

5 

7% 

10 

6 

750,000 

1,000,000 

250,000 

5 

7% 

10 

8 

1,000,000 

1,500,000 

500,000 

6 

9 

12 

10 

1,500,000 

2,000,000 

500,000 

6 

9 

12 

12 

2,000,000 

3,000,000 

1,000,000 

7 

10% 

14 

14 

3,000,000 

4,000,000 

1,000,000 

8 

12 

16 

16 

4,000,000 

5,000,000 

1,000,000 

9 

13% 

18 

18 

5,000,000 

6,000,000 

1,000,000 

10 

15 

20 

20 

6,000,000 

7,000,000 

1,000,000 

10 

15 

20 

20 

7,000,000 

8,000,000 

1,000,000 

10 

15 

20 

20 

8,000,000 

9,000,000 

1,000,000 

10 

15 

22 

22 

9,000,000 

10,000,000 

1,000,000 

10 

15 

22 
1       25 

22 

10,000,000 

I........ 

1     io 

1        15 

25 

Total 

$ 

Jurat  for  Executors  and  Administrators. 

We — I 

the  undersigned  execut administrat ,  do  hereby  solemnly 

swear — affirm  that  on  the day  of ,  19 ,  the 

court  at granted  letters  testamentary  or 

of  administration  upon  the  estate  of  the  foregoing  named  decedent  to 

;  that have  made  diligent  search  for  property 

of  every  kind  left  by  the   decedent;    that    have   carefully  read  the 

instructions  printed  on  this  form;  that  hereon  is  listed  all  of  the  property, 
tangible  and  intangible,  forming  the  gross  estate  of  the  decedent  so  far  as  it 

has  come  to   knowledge  and  information ;  that have  no 

knowledge  of  any  transfers  made  or  trusts  created  in  contemplation  of  death 
or  to  take  effect  at  or  after  death,  except  as  stated  on  Schedule  E ;  that  to  the 

best  of knowledge,  information,  and  belief  the  value  shown  for  each 

item  of  property  listed  hereon  was  the  actual  and  full  value  of  the  same  at  the 
time  of  decedent's  death;  and  that  the  debts,  expenses,  and  charges  entered 
hereon  as  deductions  from  the  gross  estate  are  correct  and  legally  allowable. 


Jurat  for  Beneficiaries,  Custodians,  and  Trustees. 

I  -We  

the  undersigned  beneficiar Custodian — Trustee,   do   hereby  solemnly 

ewear — affirm  that have  carefully  read  the  instructions  printed  on  this 

form ;  that  hereon  is  listed  all  of  the  property,  tangible  or  intangible,  contained 

in  the  gross  estate  of  the  decedent  which  has  come  into possession  and 

control;   that  to  the  best  of    knowledge,  information,  and   belief,  the 

value  shown  for  each  item  of  property  listed  hereon  was  the  actual  and  full 


Forms.  373 

value  of  the  same  at  the  time  of  the  decedent's  death;  and  that  the  debts, 
expenses,  and  charges  entered  hereon  as  deductions  from  the  gross  estate  are 
correct  and  legally  allowable. 

(Name) 

(Address)   

(Name) 

(Address) 

(Name) 

(Address) 

Subsoribed  and  sworn   to  before  me,  at 

this day  of   ,  19.... 


Notary  Public — Deputy  Collector. 
Note. — If  there  is  more  than  one  executor  or  administrator  all  must  sign 
and  swear  to  the  return. 
Attorney  'a   name   and   address 

(The  foregoing  forms  are  taken  from  the  Second  Edition  of  Gleason  and 
Otis  on  Inheritance  Taxation,  with  certain  changes  due  to  subsequent 
revision  by  the  Government.) 


SIXTY-DAY   NOTICE  —  ESTATE    OF   NONRESIDENT.* 

To   be    filed    in   duplicate   by   executor   or   person    in    possession    of    property. 

(Observe  instructions  on  reverse  side.) 

Name  of  decedent 

Date  of   death 

Place  of  death 

Residence 

19... 

Commissioner  of  Internal  Revenue, 

Estate  Tax  Division,  Treasury  Department, 
Washington,  D.  C. 

1.  I ,  pursuant  to  the  requirements  of 

section  404  of  the  Revenue  Act  of  1918,  approved  February  24,  1919,  hereby 
give  notice  that  I  had  actual  or  constructive  possession  of  property  or  an 
interest  in  property  which  constituted  a  part  of  the  gross  estate  situated  in 
the  United  States  of  the  above-named  decedent  on  date  of  death,  or  I  came 

into  possession  of  such  property  on  the day  of ,  19.  .  .  . 

The  description  and  approximate  value  of  such  property  at  tho  time  of 
death  were  as  follows: 

Description.  Value. 


(Attach  schedule  if  more  space  is  required.) 


•This  is  Form  705  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Estate  Tax,  Form  705,  Revised  July. 
1919." 


374  Federal  Estate  Tax. 

I  also  have  information  that  property  or  an  interest  in  property  situated 
in  the  United  States  belonging  to  said  decedent  was  in  the  possession  of 
others,  as  shown  below: 

Name  of  possessor.  Address.  Description  of  property. 


2.  To  the  best  of  my  knowledge  the  value  of   the  gross  estate  of  the  de- 
cedent situated  in  the  United  States  is  $ and  the  approximate 

values   of   the   various   classes   of   property   comprising   such   gross  estate   at 
date  of  death  were  as  follows: 


Real  estate 

Stocks   and   bonds 

Miscellaneous  personalty 

Property  transferred    (see  Instructions  4  [c] ) 

Property  owned  jointly 

Life  insurance  for  benefit  of  estate 

Other  life  insurance 


(Estimated  values  will  be  accepted.)  Total 

That  the  names  and  addresses  of  the  legal   representatives  of  the  estate 
and  their  attorneys  insofar  as  known  to  me  are: 

Executor  or       *,  In  United  States 

Administrator   I  Outside  United  States 


Name.  Address. 


...  (In  United  States 

Attorneys   (  0utside  United  States. 


I  hebeby  certify  that  I  have  carefully  read  the  instructions  on  the  reverse 
side  of  this  form  and  that  all  the  statements  made  herein  are  correct  to  the 
best  of  my  knowledge  and  belief. 

Signature 

Designation 

(See  paragraph  2  of  instructions  on  back.) 
Address 

Instructions. 

1.  Estates  subject  to  notice. — This  notice  must  be  filed  for  the  estates  of 
all  nonresident  decedents  having  any  gross  estate  as  defined  by  the  law,  con- 
sisting of  property  situated  in  the  United  States,  which  includes  the  States, 
the  Territories  of  Alaska  and  Hawaii,  and  the  District  of  Columbia. 

2.  Persons  required  to  file  notice  and  time  of  filing, — This  notice  must  be 
filed  by  all  persons  having  possession  of  any  property,  situated  within  the 
United  States,  which  forms  part  of  the  gross  estnte  of  a  nonresident  decedent. 
The  notice  must  be  filed  within  sixty  days  after  receiving  information  of 
the  decedent's  death,  or,  where  possession  is  acquired  after  such  death,  within 
sixty  days  after  taking  possession.  This  requirement  applies  to  agents, 
bankers,  beneficiaries,  brokers,  custodians,  debtors,  factors,  fiduciaries,  guar- 
dians, joint  owners,  partners,  safe-depo3it  companies,  transferees,  warehouse 
companies,  and  all  other  persons  having  possession  of  property  constituting 
part  of  the  gross  estate  of  the  decedent. 

3.  Place  of  filing — This  notice  must  be  filed  with  the  Commissioner  of 
Internal  Revenue,  Washington,  D.  C 


Forms.  375 

4.  Qrosa  estate. — The  gross  estate,  as  defined  by  section  402  of  the  Revenue 
Act  of  1918.  approved  February  24,  1919,  includes: 

(a)  Property  which    after  decedent's   death    is  subject  to   payment  of 

charges,   to   expenses  of   administration,   and   to  distribution   as 
a  part  of  his  estate. 

(b)  Interest  of  surviving  spouse,  as  dower,  courtesy,  or  estate  in  lieu 

thereof. 

(c)  Property  transferred  or  placed  in  trust  in  contemplation  of  death 

or  to  take  effect  in  possession  or  enjoyment  at  or  after  death. 

(d)  Property  held  jointly  or  as  tenants  in  the  entirety. 

(e)  Property  passing  under  a  general  power  of  appointment. 

(f)  (1)    Insurance  payable  to  a  decedent's  estate,  his   personal  repre- 

sentatives, or  to  any  person  for  the  benefit  of  the  estate. 
(2)    Insurance  payable  to  beneficiaries   in  excess  of  $40,000. 

6.  Property  situated  in  the  TJbiited  States. — The  notice  is  required  only 
with  reference  to  property  situated  in  the  United  States.  This  includes  all 
property,  whether  real  or  personal,  which  is  actually  situated  in  this  country, 
including  bonds,  money  on  deposit  in  domestic  banks,  and  debts  due  by 
domestic  creditors.  It  also  includes  stock  in  domestic  corporations,  wherever 
the  certificates  may  be  kept,  and  life  insurance  payable  by  domestic  insur- 
ance companies. 

6.  Liability  for  tax. — Any  person  in  possession  of  property  winch  constitutes 
a  part  of  the  estate  of  a  nonresident  decedent  may  be  held  personally  liable 
for  the  payment  of  the  estate  tax  in  the  event  that  the  property  is  removed 
from  the  jurisdiction  of  the  United  States  before  the  tax  has  been  satisfied, 
or  provision  made  for  its  payment. 

7.  Lien. — The  tax  is  a  lien  for  ten  years  upon  the  entire  gross  estate,  ex- 
cept such  part  of  it  as  is  used  for  the  payment  of  charges  against  the  estate 
and  expenses  of  its  administration  allowed  by  any  court  having  jurisdiction. 

8.  Penalties. — The  penalty  for  knowingly  making  any  false  statement  in 
this  notice  is  a  fine  not  to  exceed  $5,000,  or  imprisonment,  or  both.  Penalty  for 
failure  to  file  notice  as  required  is  a  fine  not  to  exceed  $500,  and  cost  of  suit. 

9.  Delinquency. — In  the  event  of  failure  to  file  this  notice  within  the  sixty 
days  prescribed  by  law,  a  detailed  explanation  under  oath  should  accompany 
the  notice  when  filed 


SIXTY-DAY    NOTICE    FOR    TRANSFER    AGENTS  —  ESTATE    OF 
NONRESIDENT* 

This  notice  must  be  filed  in  duplicate.     (Observe  instructions  on  reverse  side.) 

Name  of  decedent 

Date   of   death 

Place  of  death  if  known 

Residence 19 ...  . 

COMMISSIONER   OF    INTERNAL   Pl'.VKNl  i:. 

Estate  Tax  Division,  Treasury  Department, 
Washington,  D.  C. 
The  undersigned,  pursuant  to  the  requirements  of  section  404  of  the  Revenue 
Act    of    1918,    approved    February    24     1919,    hereby    gives    notice    that    on 
the    dav  of   19 a  communication   was   received 


•This  is  Form  714  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Estate  Tax,  Form  714,  Revised  July, 
1919." 


376  Federal  Estate  Tax. 

from    ,   acting   in   the  capacity  of    ,   whose   address 

is   ,  directing  the  transfer  to    whose 

address  is   the  stocks  or  bonds  listed  below  of  the 

Company,  a  corporation  organized  in  the  United  States,  owned  by  the  above- 
named  decedent  at  time  of  death  and  entered  on  the  books  of  such  company 
in  the  name  of   whose  address  is   

Number.  Description.  Face  value. 


(Attach  schedule  if  more  space  is  required.) 

The   names   and    addresses   of   the   legal    representatives    of    the    decedent's 
estate,  insofar  as  known  or  shown  by  the  records  of  this  company,  are: 

Name.  Address. 

Executor  or        ^  In  United  States 

Administrator       Outside  United  States 

A , .  ^  In  United  States 

Attorneys      {  0utside  United  States 

The  undersigned  has  information  that  property  owned  by  the  decedent  at 
the  time  of  death  was  in  the  possession  of  others  as  shown  below: 

Name  of  possessor.  Address.  Description. 


I  hereby  cebttfy  that  I  have  carefully  read  the  instructions  on  the  reverse 
side  of  this  form  and  that  all  statements  made  herein  are  correct  to  the  best 
of  my  knowledge  and  belief. 

Signature 

Designation 

Address 

Instructions. 

1.  By  whom  notice  must  be  filed. — This  notice  must  be  filed  by  each  com- 
pany, transfer  agent,  or  registrar  requested  to  make  transfer  of  stocks  or 
bonds  issued  by  a  corporation  organized  in  the  United  States  belonging  at 
time  of  death  to  any  person  who  died  outside  the  United  States  since  Sep- 
tember 8.  1916.  The  term  "United  States"  means  the  States,  the  Territories 
of  Alaska  and  Hawaii,  and  the  District  of  Columbia. 

2.  Time  of  filing. — .This  notice  must  be  filed  by  the  company,  transfer  agent, 
or  registrar  within  60  days  after  receipt  of  request  for  the  transfer  of  securi- 
ties belonging  to  any  person  dying  outside  the  United  States  or  within  60 
days  of  receipt  of  information  of  the  death  of  such  person. 

3.  Place  of  filing. — This  notice  must  be  filed  with  the  Commissioner  of 
Internal  Revenue  at  Washington,  D.  C. 

4.  Supplemental  data. — Copy  of  will,  inventory,  or  other  documents  received 
with  the  order  for  transfer  will  assist  the  Bureau  of  Internal  Revenue  if 
submitted  with  this  notice.  Transfer  of  stock  should  not  be  made  unless 
notice  has  been  filed  with  the  Commissioner  of  Internal  Revenue  and  per- 
mission to  make  such  transfer  has  been  granted. 


FOKMS. 


377 


This  summary,  executed  as  directed,  is  to  accompany  each  report  of  a  final  in- 
vestigation of  an  estate  by  a  Revenue  Agent  or  Collector 


TREASURY  DEPARTMENT.* 

Internal  Revenue  Bureau  —  Estate  Tax. 

Estate  of  i Collection  District  

Residence Reporting  officer 

Date  of  death ,19  Date  of  report ,19 

Executor  or  administrator 


(The  above  data  and  that  required  in  Columns  I  and  II  will  be  inserted  by 
the  examining  officer.) 


Returned 
(Form 
706). 


II. 

Recom- 
mended in 
report 


III. 
Accepted 
by  Commis- 
sioner. 


Gboss  Estates 

Realty 

Gifts  and   transfers 

Stocks  and   bonds 

Share   in   jointly-owned    property. . . 
Mortgages,  notes,  and  miscellaneous. 


Total 


Deductions  : 

Funeral  expense 

Administration  expense: 

Extcutor  's  fee 

Attorney's  fee 

Miscellaneous 

Claims  against  estate: 

Mortgages    

Debts   of   decedent 

Net  losses  during  administration. .  . . 

8upport  of  dependents 

Oother  charges  allowed  by  local  law. 
Specific  exemption 


TOTAT. 


Total  Gross  Estate 
Total  Deductions  .  , 


Net  Estate 


♦This  is  Form  722  and  contains  these  words  of  identification: 
Department,   Internal   Revenue  Service,   Form    722. 


"Treasury 


378 


Federal  Estate  Tax. 


Returned 
(Form 
706). 


Not   exceeding   $50,000.. @ 

$50,000  -  $150,000.. @ 

$150,000  -  $250,000..® 

$250,000  -   $450,000..  @ 

$450,000  -  $1,000,000.. @ 

$1,000,000  -  $2,000,000.. @ 

$2,000,000  -  $3,000,000.. @ 

$3,000,000  -  $4,000,000.. @ 

$4,000,000  -  $5,000,000.. (5) 

$5,000,000  -  $8,000,000.. @ 

$8,000,000  -   $10.000,000. @ 

Exceeding    $10,000,000.  .@ 


Total  Tax 


Percent. 


Returned . 


Additional  . 


II. 

Recom- 
mended in 
report 


III. 

Accepted 
by  Commis- 
sioner. 


AFFIDAVIT   OF   OWNERSHIP  OF  BONDS* 

State  of  

County  of ss': 

We  (I), the  undersigned  execut ,  administrat , 

beneficiar legal  representative  of  the  estate  of  de- 
ceased, who  died  on   ,   19.  . . .,  do  severally  swear  that  the  bond 

described  below  bearing  interest  at  a  higher  rate  than  4  per  centum  per 
annum  was  (or  were)  each  owned  by  the  decedent  continuously  for  at  least 
six  months  prior  to  the  date  of  his  (or  her)  death  and  upon  such  date  con- 
stituted part  of  his  (or  her)  estate,  and  that  the  following  statements  with 
respect  to  each  such  bond  are  true  to  the  knowledge  of  deponent,  to  wit: 

Date  of 
Date  of      Acquisition      Face       Coupon  or 
Maturity,  by  Decedent.    Value.  Registered. 

I    I    


Serial 
No. 


Description 
of  Issue. 


Date  of 
Issue. 


(Each  bond  must  be  entered  separately.) 


(Address  for  mail.) 


Subscribed  and  sworn  to  before  me  at this 

of   ,  19 


day 


Notary  Public,  Deputy  Collector. 


*This  is  Form  760  and  contains  these  words  of  identification:     "Treasury 
Department,  U.  S.  Internal  Revenue,  Form  760." 


Forms. 


379 


SCHEDULE  OF  COUPON  BONDS   RECEIVED   BY   COLLECTOR   IN   PAY 
MENT  OF  ESTATE  OR  INHERITANCE  TAXES  AND  TRANS- 
MITTED TO  FEDERAL  RESERVE  BANK.* 


19.. 


Schedule  of  United   States  coupon   bonds Liberty   Loan    , 

per  cent  dated    ,    19.  ... ,  due    19 ,  received   by 

,  Collector  of  Internal  Revenue  of  the   district  of 

,  in   payment  of  estate    (or   inheritance)    taxes  and   transmitted 

on  the  above  date  to  the  Federal  Reserve  Bank  of  

(Signed)    

Collector. 


(Use  separate  schedule   for   each  Issue  of  bonds. 

issue  separately.) 


Enter  each   bond   of  such 


Serial  No, 
of  Bond. 


Face  Value 


Accrued 
Interest. 


Total  (Amt.  for 

which  Accepted 

for  Taxes) . 


Total.  . 


Date  Accepted 
by  Collector. 


Federal  Reserve  Bank  of. 


19.. 


I  hereby  certify  that  I  have  examined  and   forwarded  to  the  Treasurer  of 
the  United   States   the   above-described   bonds   which    were   received    from,   the 

collector  named,  amounting  to  $ principal,  and  $ , 

accrued  interest,  which  amounts  have  been  charged  and  credited  in  the 
Treasurer's  general  account  this  day  pursuant  to  the  regulations  of  the 
Treasury  Department. 


Cashier. 


SCHEDULE    OF    REGISTERED    BONDS    RECEIVED    BY    COLLECTOR    IN 

PAYMENT    OF    ESTATE    TAXES    AND    TRANSMITTED    TO 

THE  SECRETARY  OF  THE  TREASURY,  DIVISION 

OF  LOANS  AND   CURRENCY. 


19- 


Schedule  of  United  States  registered  l>onds Liberty  Loan 

per  cent  dated    19 due  19 received  by 

,  Collector  of  Internal   Revenue  of   the    

district  of    ,  in  payment  of  estate   (or  inheritance) 

taxes  and  transmitted  on   the  above  date  to  the  Secretary   of  the  Treasury, 
Division  of  Loans  and  Currency. 

(Signed)    

Collector. 

(Use  separate  schedule   for   each  Issue  of  bonds.      Enter  each    bond  of   such 

issue  separately.) 


•This  is  Form  761  and  contains  these  words  of  identification:  "Treasury 
Department,  U.   S.   Internal   Revenue,   Form   761." 

fThis  is  Form  762  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,   Form   7(32. ' ' 


380 


Federal  Estate  Tax. 


Date  of                                                 Total 

Serial 

Name  of 

Death  of                           Accrued     (Amt.  for 

Date 

No. 

Registered 

Registered  Face  Value.  Interest.         which 

Accepted 

Owner. 

Owner.                                              Accepted 

by  Col- 

for Taxes ) . 

lector. 

Total 


REVENUE  AGENT'S  SUBPOENA  DUCES  TECUM* 
In  the  matter  of  the  Estate  of 

Deceased, 

District  of 


i\ 


The  Commissioner  of  Intebnal  Revenue. 

To 

Residing  at 

Greeting:     You  are  hereby  requirred,  under  section  1305  of  the  Revenue  Ac* 

of  1918,  to  appear  before  the  undersigned  at    

on  the day  of   ,  at o'clock 

in  the   noon,  to  give  testimony  in  the  matter  of  the  above- 
entitled  estate,  and  to  bring  with  you  the  following  books  and  papers: 


Witness  my  hand  this   day  of 


19- 


U.  S.  Internal  Revenue  Agent. 


ESTATE   TAX   DEPOSITION,  t 

Estate  of. 

District 


"  The  Commissioner,  for  the  purpose  of  ascertaining  the  correctness  of  any 
return  or  for  the  purpose  of  making  a  return  where  none  has  been  made, 
is  hereby  authorized,  by  any  revenue  agent  or  inspector  designated  by  him 
for  that  purpose,  to  examine  the  books,  papers,  records,  or  memoranda  bear- 
ing upon  the  matters  required  to  be  included  in  the  return,  and  may  require 
the  attendance  of  the  person  rendering  the  return  or  of  any  officer  or  employee 
of  such  person,  or  the  attendance  of  any  other  person  having  knowledge  in 
the  premises,   and  may  take  his  testimony  with   reference  to  the  matter  re- 


*This  is  Form  789  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Estate  Tax,  Form  789." 

fThis  is  Form  790  and  contains  these  words  of  identification:  "Treasury 
Department,  U.  S.  Internal  Revenue,  Form  790." 


Forms.  381 

quired  by  law  to  be  included  in  such  return,  with  power  to  administer  oaths 
to  such  person  or  persons.  (Section  1305,  Revenue  Act  of  1918,  approved 
February  24,   1919.) 

Every  collector,  deputy  collector,  internal-revenue  agent,  and  internal- 
revenue  officer  assigned  to  duty  under  an  internal-revenue  agent,  is  authorized 
to  administer  oaths  and  to  take  evidence  touching  any  part  of  the  administra- 
tion of  the  internal-revenue  laws  -with  which  he  is  charged,  or  where  such 
oaths  and  evidence  are  authorized  by  law  or  regulation  authorized  by  law 
to  be  taken."  (Section  1317,  Revenue  Act  of  1918,  amending  section  3165 
of  the  Revised  Statutes.) 

Estate  Tax  Deposition. 

of  

(Name  of  affiant.)  (Address.) 

county  of  ,  State  of   

being  duly  sworn  in  the  matter  of  estate  of   

deceased,  in  accordance  with  the  provisions  of  the  above-quoted  law,  and 
in  response  to  the  interrogatories  propounded  to  him,  deposes  and  says: 


CERTIFICATE  RELEASING  ESTATE  TAX  LIEN.* 

Washington,  D.  C, ,   19 

Estate  of   District   

By  direction  of  the  Commissioner  of  Internal  Revenue,  and  in  accordance 
with  section  409  of  the  Revenue  Act  of  1918,  I  do  hereby  certify  that  the 
following-described  property  formed  a  part  of  the  gross  estate  of  the  above- 
named  decedent,  subject  to  the  Federal  estate  tax: 


And  I  do  further  certify  that  the  estate  tax  with  respect  to  this  property 
has  been  fully  discharged  or  duly  provided  for.  wherefore  and  by  reason 
whereof  I  do  hereby  issue  this  certificate  releasing  the  lien  of  the  United 
States  on  the  aforesaid   property,  as  provided  by  law. 

Deputy  Commissioner. 

•This  is  Form  792  and  contains  these  words  of  identification:      "Treasury 
Department,  U.  S.  Internal  Revenue,  Form  792." 
25 


382 


Fedekal,  Estate  Tax. 


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Forms. 


383 


Internal  Revenue  Service. 
Estate  of    


.SHEET  No.    1. 


Exhibit. .. 

District  of. 

Date  of  death 


COMPARATIVE  BALANCE  SHEET* 

Name  of  company Address 

Date   of   organization Nature  of  business 

Par  value  of  shares — Common,  $.  .  Preferred,  $. .   Maturity  date  of  bonds 


Description. 


No.   1.       No.  2. 


No.  3.       No.  4.       No.  5. 


(Date) 
19.. 

(Date) 
19.. 

(Date) 
19.  . 

(Date) 
19.. 

(Date) 
19.. 

ASSETS. 

Current. 

Cash 

Notes  receivable 

$ 

$ 

$ 

1 
1 

$ 

$ 

Accounts   receivable    

Inventories: 

Finished   goods    

1 

1 

Materials  and  work  process 
Raw  materials 

Supplies 

Accrued   interest    

Due    from   officers    and    em- 
ployees  

Stocks    and    bonds    of    other 
companies.    , 

Liberty  bonds 

Mortgages 

Fixed. 
Land 

Buildings 

Machinery   and   tools 

Vehicles 

Working  animals 

Furniture   and   fixtures 

Patents   and   trade-marks.  .  .  . 

Miscellaneous. 

•This  is  Form  831  and  contains  these  words  of  identification:     "Treasury 
Department,  Internal  Revenue  Service,  Estate  Tax  Division,  Form  831." 


384 


Federal  Estate  Tax. 


Treasury  bonds. 


Total . 


LIABILITIES. 

Current. 

Notes  payable 

Accounts  payable 

Accrued  salaries  and  wages. 
Accrued  interest 


Fixed. 

Bonded  debt 

Mortgages 

Reserves : 

For  bad  debts 

For   sinking   fund 

For  depletion 

For  depreciation   of — 

Buildings 

Machinery  and   tools.. 

Vehicles 

Working  animals 

Furniture  and  fixtures 

Leaseholds 

Patents  and   trade-marks 


Capital  and  Surplus. 

Common  stock 

Preferred  stock 

Surplus  and  undivided  profits 

from   last  year 

Undivided    profits   carried   to 

surplus  this  year 


Total. 


Forms. 


085 


Estate  of 


SHEET  No.  2 


Exhibit. . . 
.District  of. 


ADJUSTED  BALANCE  SHEET.* 
Name  of  Company Address . 


Description 


No.  5 
As  per 
Books 


No.  5a. 
Actual 
Value 


Do  not 
write  in 

this 
column. 


ASSETS. 
Current. 

Cash 

Notes  receivable 

Accounts  receivable  .... 
Inventories: 

Finished  goods  .... 

Materials    and    work 

Raw  materials  .... 

Supplies   

Accrued  interest  

Due  from  officers  and  employees.... 
Stocks  and  bonds  of  other  companies* 

Liberty  bonds*  

Mortgages 


process. 


Fixed. 

Land 

Buildings 

Machinery    and    tools. . .  . 

Vehicles 

Working  animals 

Furniture  and  fixtures  .  .  . 

Leaseholds  

Patients  and  trade-marks 
Good  will 


Miscellaneous 

Unexpired  insurance 

Other  prepaid  items , 

Sinking   fund 

Treasury  stockt , 

Treasury  bondst  


Total 


J  This  is  Form  831-A  and  contains  these  words  of  identification:  "Treasury 
Department.  Internal  Revenue  Service.  Estate  Tax  Division,  Form  831-A." 

*  Submit  schedules  showing  description  and  amount  of  each  item  carried  in 
these  accounts. 

t  Submit  schedules  showing  number  of  shares,  or  bonds,  dates  acquired, 
prices  paid,  and  basis  of  book  values. 


386 


Federal  Estate  Tax. 


LIABILITIES. 
Current. 

Notes  payable 

Accounts  payable 

Accrued  salaries  and  wages. 
Accrued  interest  


Fixed. 

Bonded   debt   

Mortgages 

Reserves : 

For  bad  debts  

For  sinking  fund 

For  depletion 

For  depreciation  of — 

Buildings 

Machinery  and  tools  .  .   . 

Vehicles 

Working  animals 

Furniture  and  fixtures  . 

Leaseholds   

Patents  and  trade-marks . 


Capital  and  surplus. 

Common  stock 

Preferred  stock 

Surplus   and    undivided    profits    from    last 

year 

Undivided   profits   carried    to   surplus   this 

year 


Total 


Forms.  387 


SHEET  No Exhibit 


Nora— Sheets  3  to  7,  inclusive:  A  separate  Analysis  on  this  Form  must 
be  filed  for  each  of  the  five  years  covered  by  the  Balance  Sheets  shown  oh 
Sheet  1.  The  five  Sheets  thus  required  are  to  be  numbered  Sheet  3.  Sheet  4, 
Sheet  5,  Sheet  6,  and  Sheet  7,  and  the  number  of  the  Balanace  Sheet  referred 
to  should  also  be  inserted  by  the  Agent  in  the  spaces  provided,  Sheet  3  re- 
ferring to  Balance  Sheet  No.  1,  Sheet  4  referring  to  Balance  Sheet  No.  2,  etc. 

Estate  of District  of   


ANALYSIS  OF  SURPLUS.* 

Balance  Sheet  No 

Name  of  Company Address 

Surplus  and  Undivided  Profits  at  beginning  of  Year 

19        

Add: 

Net  income  for  year  without  deducting  income  and 

excess  profits  taxes  paid  during  the  year $ 

Other  credits  to  surplus — 


Total 

Deduct : 

Income  and  excess  profits  taxes  paid  during  the 

year  on  income  of  the  previous  year $. 

Additional  income  and  excess  profits  taxes  paid 
during  the  year  on  income  of  previous  years.  . 
Dividends  paid  during  the  year — 
From  current  income — 

In  cash    ( date ) 

In  stock   ( date ) 

From  income  of  previous  years — 

In  cash    ( date ) 

In  stock  ( ) 

Other  charges  to  surplus — 


Surplus  and  Undivided  Profits  at  the  end  of  the  year   (as  shown 
by  Balance  Sheet  No ) 9  ■ 


'This  is  Form  831-B  and  contains  these  words  of  identification:     "Treasury 
Department,  Internal  Revenue  Service,  Estate  Tax  Division,  Form  831-B." 


388  Federal  Estate  Tax. 

SHEET  No.  8.  Exhibit 

Estate  of , District  of  

ANALYSIS  OF  SURPLUS.* 

Balance  Sheet   No.   5a. 

Name  of   Company    Address 

Surplus  and  Undivided   Profits   at  the  end  of  the  year    19 , 

as  shown  by  Balance  Sheet  No.  5 $. 

Add: 

Adjustments  by  way  of  additions  arising  in  connection  with 
adjusted  values  shown  in  Balance  Sheet  No.  5a: 


Total $ . 

Deduct: 

Adjustments  by  way  of  deductions  arising  in 
connection  with  adjusted  values  shown  in 
Balance  Sheet  No.  5a: 


Adjusted  Surplus  as  shown  by  Balance  Sheet  No.  5a. 


*This  is  Form  831-C  and  contains  these  words  of  identification:     "Treasury 
Department,  Internal  Revenue,  Estate  Tax  Division,  Form  831-C." 


Forms. 


389 


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IV. 

RECENT  CHANGES  IN  REGULATIONS. 

A  very  recent  revision  of  the  Estate  Tax  Regula- 
tions, made  in  the  present  year,  has  resulted  in  cer- 
tain changes  which,  for  convenience,  are  here 
grouped  together. 

(1) 

TRANSFER  OF  STOCK  AND  PAYMENT  OF  INSURANCE;   HOW 
EFFECTED ;  PAYMENT  OR  SECURING  OF  TAX. 

The  revision  of  1921  adds  the  following  new 
articles : 

Art.  75-A.  Transfer  of  stock  of  nonresident  decedent; 
how  made. — Wherever  a  transfer  agent  is  required  to  file 
60-day  notice  as  provided  in  Article  74,  he  shall  not  make 
transfer  of  the  stock  standing  in  the  name  of  the  decedent 
until  there  has  been  delivered  to  such  collector  of  internal 
revenue  as  may  be  designated  by  the  Commissioner  the 
bond  of  the  party  to  whom  the  stock  is  to  be  transferred 
with  corporate  surety  in  an  amount  to  be  fixed  by  the 
Commissioner,  conditioned  for  the  payment  of  the  tax  upon 
the  transfer  of  the  decedent's  estate,  not  exceeding  in 
amount  the  value  of  the  stock  to  be  transferred.  Upon 
receipt  of  the  60-day  notice  the  Commissioner  will  at  once, 
upon  request,  fix  the  amount  for  which  the  bond  is  to  be 
given.  In  lieu  of  the  bond  a  deposit  of  the  amount  so  fixed 
may  be  made  with  such  collector  of  internal  revenue  as  the 
Commissioner  may  designate.  Where  a  sum  of  money  is 
deposited  in  lieu  of  the  bond,  and  it  exceeds  the  amount 
of  the  tax  as  finally  determined,  the  excess  will  be  refunded 
to  the  person  making  deposit.  In  lieu  of  the  provisions 
and  restrictions  hereinbefore  set  forth,  transfer  agents  are 
authorized  to  make  a  transfer  of  stock  standing  in  the 
[391] 


392  FEDERAL  ESTATE  TAX. 

name  of  a  nonresident  decedent  to  the  duly  qualified  an- 
cillary executor  or  administrator  within  the  United  States, 
who  shall  make  a  return  on  form  706,  as  any  other  executor 
is  required  by  law  to  do,  provided  that  such  transfer  agent 
at  the  time  of  making  such  transfer  gives  notice  thereof 
in  writing  to  the  Commissioner  of  Internal  Revenue. 

Art.  76-A.  Payment  of  policy  of  life  insurance  taken  out 
by  resident  and  nonresident  decedents ;  how  made. — Where- 
ever  an  insurance  company  is  required  to  file  a  60-day 
notice,  as  provided  in  Article  76,  where  the  insured  was  a 
nonresident  it  shall  not  make  payment  of  any  policy  or 
policies  to  a  foreign  executor  or  administrator,  or  to  an 
individual  beneficiary7,  until  there  has  been  delivered  to 
such  collector  of  internal  revenue  as  may  be  designated  by 
the  Commissioner  the  bond  of  the  party  to  whom  the  insur- 
ance is  to  be  paid,  with  corporate  surety  in  an  amount  to  be 
fixed  by  the  Commissioner,  conditioned  for  the  payment  of 
the  tax  upon  the  transfer  of  the  decedent's  estate,  not  ex- 
ceeding the  amount  of  insurance  payable  under  such  policy 
to  the  executor,  and  the  excess  over  $40,000  of  the  aggre- 
gate insurance  payable  to  specific  beneficiaries  other  than 
the  executor  or  the  estate  of  the  decedent.  Upon  receipt 
of  the  60-day  notice  the  Commissioner  will  at  once,  upon 
request,  fix  the  amount  of  the  bond  to  be  given.  In  lieu 
of  such  bond  a  deposit  of  the  amount  fixed  may  be  made 
with  such  collector  of  internal  revenue  as  the  Commissioner 
may  designate.  If  in  lieu  of  the  bond  a  sum  of  money  is 
deposited,  and  such  sum  exceeds  the  amount  of  tax  as 
finally  determined,  the  excess  will  be  refunded  to  the  per- 
son making  the  deposit.  In  lieu  of  the  bond  or  a  deposit  of 
money,  where  insurance  is  payable  to  a  foreign  executor 
or  administrator,  the  insurance  may  be  paid  to  ancillary 
executor  or  administrator  appointed  within  the  United 
States,  provided  that  such  ancillary  executor  or  adminis- 
trator shall  have  given  bond  with  corporate  surety  in  an 
amount  sufficient,  in  the  opinion  of  the  Commissioner,  to 
discharge  the  tax  liability  of  the  estate,  not  exceeding  the 


RECENT  CHANGES  IN  REGULATIONS.  393 

amount  of  insurance  subject  to  be  included  within  the 
gToss  estate  of  the  decedent. 

Wherever  insurance  companies  are  required  to  file  a  60- 
day  notice,  as  provided  in  Article  71,  where  the  decedent 
is  a  resident  and  there  is  subject  to  be  included  within  the 
decedent's  gross  estate  any  excess  over  $40,000  in  the 
aggregate  of  insurance  payable  to  specific  beneficiaries 
other  than  the  executor  or  the  estate  of  the  decedent,  the 
same  provisions  and  restrictions  in  regard  to  payment  of 
insurance  shall  apply  and  govern  insurance  companies  as 
are  set  forth  in  this  article  in  the  case  of  nonresidents. 

Where  insurance  companies  are  required  to  file  a  60- 
day  notice,  as  provided  in  Article  71  or  in  Article  76,  if 
the  decedent  is  a  resident  or  nonresident,  and  there  is  an 
excess  over  $40,000  in  the  aggregate  of  all  insurance  pay- 
able to  specific  beneficiaries  other  than  the  executor  or  the 
estate  of  the  decedent,  insurance  companies  are  authorized, 
in  lieu  of  the  provisions  and  restrictions  hereinbefore  set 
forth,  upon  consent  of  the  beneficiaries  to  make  payment  of 
such  insurance  to  such  beneficiaries  through  the  duly 
qualified  executor  or  administrator  within  the  United  States 
or  through  the  duly  qualified  ancillary  executor  or  adminis- 
trator in  the  United  States,  who  shall  make  return  on 
form  706  of  the  excess  over  $40,000  of  such  insurance,  if 
the  estate  be  that  of  a  nonresident,  or  that  of  a  resident 
if  there  be  a  net  estate  subject  to  tax. 

(2) 

RESERVATION  OF  POWER  TO  CONTROL  ADMINISTRATION   OF 

TRUST. 

In  the  revision  of  1921,  Art.  25  reads  as  follows: 

"Property  held  in  trust  under  any  instrument  in  which 
the  grantor  has  reserved  a  power  of  revocation,  or  any 
power  which  has  that  effect,  constitutes  a  part  of  the  gross 
estate  of  such  grantor  for  the  purposes  of  this  tax.  For 
example,  where  a  father  places  property  in  trust  for  the 


394  FEDERAL  ESTATE  TAX. 

present  benefit  of  his  son,  but  reserves  power  to  revoke  the 
trust  at  any  time  during  his  life,  the  value  of  the  entire 
property  transferred  should  be  included  in  the  gross 
estate." 

The  following  sentence  in  the  revision  of  1919  is 
omitted : 

"A  transfer  by  way  of  trust  is  also  taxable  where  the 
grantor  reserves  power  to  control  the  administration  of 
the  trust,  as  by  reserving  power  to  change  the  trustee,  the 
trust  period,  the  trust  property,  or  the  respective  inter- 
ests of  the  beneficiaries  in  such  property." 

The  present  intention  is  apparently  to  include 
only  such  transfers  as  contain  what  amounts,  in 
substance,  to  a  reserved  power  of  revocation.  (See 
p.  54.) 

(3) 

VALUATION   OF   INTEREST   IN   BUSINESS;   GOOD   WILL. 

The  revision  of  1921  treats  this  subject  as  fol- 
lows: 

"A  fair  appraisal  as  of  the  date  of  death  should  be 
made  of  all  the  assets  of  the  business,  tangible  and  in- 
tangible, and  the  business  should  be  given  a  net  worth 
equal  to  the  amount  which  a  purchaser,  whether  an  indi- 
vidual or  corporation,  would  be  willing  to  pay  therefor  at 
a  normal  sale  in  view  of  the  net  value  of  the  assets  and  the 
demonstrated  earning  capacity.  Special  attention  should 
be  given  to  fixing  an  adequate  figure  for  the  value  of  the 
good  will  of  the  business  in  all  cases  where  the  decedent 
has  not,  for  a  fair  consideration  in  money  or  money's 
worth,  agreed  that  his  interest  therein  shall  pass  at  his 
death  to  his  surviving  partner  or  partners."  (Art.  15, 
par.  5.) 


RECENT  CHANGES  IN  REGULATIONS.  395 

The  special  provisions  in  the  revision  of  1919 
concerning  cases  in  which  the  deceased  partner  dis 
poses  of  his  interest  to  the  surviving  partners  (see 
pp.  101-3)  are  omitted.  Good  will  is  included  in  all 
cases  "  where  the  decedent  has  not,  for  a  fair  con- 
sideration in  money  or  money's  worth,  agreed  that 
his  interest  therein  shall  pass  at  his  death  to  his 
surviving  partner  or  partners;"  but  specific  cases 
are  not  treated. 

(4) 

DEDUCTION    OF   EXECUTORS'    COMMISSIONS. 

The  present  deduction  provision  is  set  out  at 
pages  124-5.    The  revision  of  1919  provided : 

"No  amount  may  be  deducted  as  commission  in  excess 
of  that  actually  paid,  or  to  be  paid.  Where  the  commis- 
sion has  not  been  allowed  by  the  probate  court,  it  may  be 
deducted  if  its  amount  and  future  allowance  are  reason- 
ably certain.  In  such  case  the  executor  must  furnish 
satisfactory  evidence  at  the  time  investigation  is  made 
that  an  account  will  be  filed  and  the  commission  claimed. 
Where  the  executor  does  not  intend  to  make  any  charge 
upon  the  estate  for  his  services,  or  where  he  does  not  in- 
tend to  file  any  account  with  the  local  court,  no  deduction 
may  be  claimed."     (Art.  42.) 

The  amendment  of  1921  appears  to  abolish  a  dif- 
ference formerly  made  between  the  case  of  execu- 
tors' commissions  and  attorneys'  fees.  (See  supra, 
pp.  128-9.) 


396  FEDERAL  ESTATE  TAX. 

(5) 
DEDUCTION  OF  ATTORNEYS'   FEES. 

The  present  deduction  provision  is  set  out  at 
pages  127-8.  The  revision  of  1919  contained  the 
f  ollowing : 

"Deduction  may  be  taken  for  an  attorney's  fee  for 
services  rendered  to  the  executor  or  administrator,  in  his 
official  capacity,  to  the  extent  that  such  fees  are  allowed 
by  the  laws  of  the  local  jurisdiction.  Fees  may  be  de- 
ducted, although  not  allowed  by  the  decree  of  court,  pro- 
vided they  are  reasonable  in  amount,  and  have  actually 
been  paid,  or  will  be  paid.  Where  the  disbursement  has 
not  been  made,  the  executor  must  furnish  at  the  time  of 
the  investigation  satisfactory  evidence  that  payment  will 
be  made,  and  the  amount  of  such  payment. 

The  fees  of  an  attorney  employed  by  the  executor  to 
conserve  the  assets  of  the  estate,  to  resist  claims,  and  to 
defend  the  will  may  be  deducted,  since  these  are  duties 
which  the  executor  is  required  to  perform.  The  cost  of 
litigation  instituted  by  the  beneficiaries  as  to  the  amount 
of  their  respective  interests  may  not  be  deducted,  since 
expenses  of  this  character  are  properly  charges  against 
the  beneficiaries  personally,  rather  than  against  the  gen- 
eral estate."     (Art.  43.) 

(6) 
support  of  dependents;  deductibility. 
Article  49,  as  contained  in  the  revision  of  1921, 
is  set  out  at  page  148.  It  is  materially  different 
from  the  revision  of  1919.  The  changes,  however, 
are  not  radical.  Apparently  support  may  now  con- 
sist of  supplies,  or  similar  essentials,  as  well  as 
money;  and  there  is,  perhaps,  some  relaxation  of 


RECENT  CHANGES  IN  REGULATIONS.  397 

the  earlier  rule  thai  the  alleged  dependent  must  1>'- 
in  actual  need  of  support.     (See  pp.  14S,  148a.) 

(7) 

MANNER  OF  PAYING  TAX. 

Article  65,  as  contained  in  the  revision  of  1!M!>, 
provided  for  payment  of  the  tax  only  by  check,  and 
required  checks  to  be  payable  to  the  order  of  the 
Commissioner,  and  to  be  certified.  The  revision  of 
1921  provides  for  payment  by  "checks,  drafts  or 
money  orders,"  and  that  they  shall  be  payable  "to 
the  order  of  Collector  of  Internal  Revenue." 

The  last  sentence  of  the  article  formerly  read: 
"Acceptance  of  the  check  discharges  the  tax  only 
in  case  subsequent  investigation  and  audit  disclose 
that  the  correct  amount  has  been  paid."  It  now 
reads:  "Payment  so  made  of  an  amount  indicated 
to  be  due  upon  the  return  discharges  the  tax  only 
in  case  subsequent  investigation  and  audit  disclose 
that  the  correct  amount  has  been  paid."  The  re- 
vision recognizes  that  the  payment  may  be  of  an 
amount  notified  to  be  due  as  additional  tax, — in 
which  case  payment  of  the  sum  fixed  is  recognized 
as  a  discharge. 

(8) 

KXTENSION   OF  TIME  TO  FILE  RETURN. 

Article  81,  as  contained  in  the  revision  of  1921, 
is  set  out  at  pages  190-1.  It  differs  from  the  revision 
of  1919  in  requiring  the  first  application  to  be  made 
at  least  thirty  days  prior  to  the  due  date  of  the 
return,  and  that  statement  be  made  concerning  the 

26 


398  FEDERAL  ESTATE  TAX. 

gross  estate  and  the  deductions  claimed.  The 
former  requirement  that,  "At  the  time  of  filing  such 
return  he  (the  executor)  must  pay  a  sum  sufficient 
in  the  opinion  of  the  collector  to  satisfy  the  tax," 
is  retained,  but  limited  to  cases  where  no  extension 
of  time  to  pay  the  tax  has  been  granted.  It  is  pro- 
vided that  the  statements  accompanying  the  appli- 
cation will  be  investigated  both  in  acting  upon  the 
application  and  in  determining  the  amount  to  be 
paid  in  the  first  instance. 

(9) 

PAYMENT  OF  TAX ;  CONDITIONS. 

The  revision  of  1921  makes  changes  in  the  last 
paragraph  of  Article  90,  so  that  it  reads: 

"Payment  will  not  be  accepted  before  a  return  in 
proper  form  has  been  filed,  except  in  cases  where  an  ex- 
tension of  time  to  file  a  return  has  been  granted  but  no 
extension  of  time  has  been  granted  within  which  to  pay 
the  tax,  and  the  executor  desires  to  make  payment  under 
section  407  of  the  act  of  an  amount  sufficient  in  the 
opinion  of  the  collector  to  discharge  the  tax.  Payment 
of  the  amount  of  tax  shown  to  be  due  by  a  return  accepted 
by  the  collector,  executed  in  good  faith  and  accurate  so 
far  as  the  executor  could  ascertain  from  his  own  knowl- 
edge and  in  the  exercise  of  diligence,  will  be  considered 
payment  of  the  tax  in  full  under  section  407  of  the  act, 
subject  to  adjustment  resulting  from  investigation,  except 
as  to  any  item  which  should  have  been  but  was  not 
embodied  in  the  return.  If  at  the  time  payment  is  made 
the  exact  amount  of  the  tax  cannot  be  determined,  the 
payment  of  a  sum  of  money  sufficient,  in  the  opinion  of 
the  collector,  to  discharge  the  tax  will  be  considered  pay- 
ment in  full,  except  as  the  tax  is  adjusted  after  investiga- 
tion.    (See  Arts.  78,  95.)     If  the  return  filed  contains  a 


RECENT  CHANGES  IN  REGULATIONS.  399 

gross  or  fraudulent  misstatement  of  fact,  the  payment  of 
the  amount  of  tax  shown  to  be  due  thereby  will  not  be 
deemed  to  be  payment  in  full  of  the  tax,  since  the  col- 
lector's decision  is  based  upon  the  assumption  that  the 
return  is  made  in  good  faith."     (Art.  90.) 

(10) 

INTEREST   WHERE    FRAUDULENT   RETURN    FILED. 

The  revision  of  1919  provided  that  where  the 
return  contained  a  gross  or  fraudulent  misstatement 
of  fact  "interest  upon  the  unpaid  balance  of  tax, 
determined  after  investigation,  will  be  added  at  the 
rate  of  six  per  centum  per  annum  from  the  expira- 
tion of  one  year  after  the  decedent's  death  to  the 
expiration  of  30  days  from  notification  and  there- 
after at  the  rate  of  ten  per  centum  per  annum  until 
paid."    (Art.  96.) 

The  italicized  words  are  omitted  in  the  revision  of 
1921. 

(11) 

TIME    WHEN    TAX    PAYMENT    MAY    BE    ENFORCED. 

The  revision  of  1921  adds  the  following  sentence 
to  Art.  120. 

"While  no  interest  may  be  added  to  the  tax  unless  pay- 
ment thereof  has  not  been  made  within  one  year  and  180 
days  after  decedent's  death,  the  tax  itself  is  due  and  must 
be  paid  within  one  year  after  the  decedent's  death  unless 
an  extension  of  time  for  the  payment  thereof  has  been 
granted   by  the  Commissioner. ' ' 

This  is  an  express  formulation  of  a   ruling  pre 
viously  made  by  the  Bureau,  and  set  out  at   page 
196. 


GENERAL  INDEX 


GENERAL  INDEX. 


References  are  to  Pages. 


A 

Abatement  paok 

See  Claims  for  Abatement. 
Accounts  receivable 

valuation    of    103 

Advance  payment 

when    not    permitted    (Revenue    Act    of    1916,    T.    D. 

2415) 251,  252 

Advancements 

not  necessarily  transfer  in  contemplation  of  death...     48 
payments     to     children — when     considered     advance- 
ments  24,    25 

Affidavit  of  ownership 

of  bonds  used  to  pay  tax — Form  760 378 

Ambassador 

residence  of 8 

Analysis 

of  surplus  of  corporation— Forms  831-B,  831-C...387,  388 
Annuities 

inclusion    in   gross   estate 22 

valuation  of 109- 114 

Appointed  property 

general  rule  of  inclusion — constitutionality 72 

power  must  be  general 73 

powers  exercised  prior  to  February  24,  1919 73-79 

original    department    rule — property    included    in 

all  cases  73-75 

later  rule — inclusion  dependent  on  rights  of  cred- 
itors   of    appointor 75,     76 

not  included  in   New   York,  Maryland   and   Penn- 
sylvania  77,     78 

[403] 


404  GENERAL  INDEX. 


References  are  to  Pages. 


Appointed  property — Continued  page 

decisions  in  Illinois  and  Ohio 78,     79 

rule  in  Pennsylvania — not  taxable 351,  352 

inclusion  in  gross  estate   (Revenue  Act  of  1916,  T.  D. 

2477,  3088 270,  351,  352 

Appraisal 

of  personal  and  household  effects 108 

Appreciation 

in  value  of  property  after  death — not  included  in  gross 

estate 12,  249 

Assessed  valuation 

as  evidence  of  value 95 

Attorney's  fees 

deductibility 127-129 

Auction  sales 

as  evidence  of  value 95 


B 

Balance  sheet 

of    corporation — comparative — form    831 383,  384 

of  corporation — adjusted — form   831-A 385,  386 

Bare  legal  title 

property  not  included  in  gross  estate 22,    23 

Beneficiaries 

when  to  give  notice 172,  173,  265,  266 

when  to  file  return 184,  185 

Bonds 

inclusion   in   gross   estate 19 

of  domestic  corporations — when  not  included  in  gross 

estate  (Revenue  Act  of  1916,  T.  D.  2530) 285-287 

of     foreign     corporations — when     included     in     gross 
estate  (Revenue  Act  of  1916,  T.  D.  2530) 287 

Books  and  records 

production  may  be  required 229,  230 


(JENERAL  INDEX.  405 


References  are  to  Pages. 


British  treasury  page 

property  deposited  with — situs 89,  90,  310,  311 

property    deposited    with — valuation 89,  90,  n. 

Brokerage  fees 
deductibility 129 

Burial  plot 

deduction   of  expense 121,  122 

Business 

interest    in — how    valued 101-103 

c 

Cemetery  lots 

inclusion   in   gross   estate 18 

Certificate  of  release 

of  estate  tax  lien — form  792 381 

Charitable  and  similar  bequests 

deductibility 152-161 

amount   of   deduction 159,  160 

charitable   corporations — what    are 154,  155 

conditional  bequests 157,  158 

foreign    bequests    deductible 154 

general  rules 153,  154 

gifts  in   decedent's  life  time 153,  154 

private   stockholders  or  individuals — who   are 156 

proof   required    • 156,  157 

religious  corporations  conducting  business 155,  156 

specific  cases 158,  159 

time  of  death 152 

Children 

payments  to — when  included  in  gross  estate 24,     25 

Christmas  present 

as  transfer  in  contemplation  of  death 47 

Claims 

against  estate-deductibility 130,131 

how   paid — deduction  of  taxes 242,  243 


406  GENERAL  INDEX. 


References  are  to  Pages. 


Claims  for  abatement  PAGE 

abatement   of   excess   tax — limitation   of   time   to   file 

claim 239 

does  not  bar  collection 239 

may  be  made  on  form  47 237,  238 

papers  to  be  filed 238 

where  rejected  does  not  affect  interest 239 

Claims  for  refund 

may  be  made  on  form  46 237,  238 

papers    to    filed 240,  241 

time  to  file — payment  in  instalments 241,  242 

when  deduction  of  charitable  gift  not  allowed 167 

Close  corporation 

valuation    of    stock .96,    97 

valuation  of  stock — where  option  to  purchase 
given 13,  103,  n. 

Collection  of  tax 

enforcement  by  personal  liability  of  executor  or  bene- 
ficiary  216 

from  beneficiary • 225,  226 

remedy  by  suit — not  exclusive 214,  215 

remedy   by   distraint 215 

Collector 

to  inform  commissioner  of  30-day  notice  from  non- 
resident estate  (Revenue  Act  of  1916,  T.  D. 
2490) 271-274 

Commissions 

of  executor— deductibility 124,  125,  395 

bequest   in   lieu   of — deductibility 125,  126 

of  trustee — deductibility 126 

Common,  estates  in 

not  included  in  gross  estate 58 

Compromise 

limitation  of  power 218 

money    received — not    refunded 218 

power  to  compromise  government  claims 217,  218 


GENERAL  INDEX.  40/ 


References  are  to  Pages. 


Community  property  ita<;k 

inclusion    in    gross   estate 58-61 

in    Texas — one-half    to    be    included    in    gross    estate 
(Revenue  Act  of  1916,  T.   D.  2450) 259-262 

Contingent  interests 

inclusion   in   gross   estate 21 

valuation   of 114 

Corporate  agents 

duties  of  (Revenue  Act  of  1916,  T.  D.  2490) 271-274 

Court  decisions 

promulgated  (T.  D.  2976,  3027,  3088) 351,  352 

Courtesy 
See  Dower 

Crops 

vaulation  of 104 

Custodian 

of  property — when  to  give  notice 269 

D 

Death,  actions  for 

right  not  included  in  gross  estate 24 

Death  benefits 

included    in    taxable    insurance 79 

Deductions 

administration  expenses 123-129 

attorneys'  fees 127-129,  396 

brokerage  fees 129 

charitable    and    similar   bequests 152-16] 

claims  against  estate 130,  131 

commission  of  executor 124-127,  395 

decision  of  local  courts — what   effect  to  receive. .  .119,   L20 

funeral   expenses 121-123 

general    requirements   for 118,  119 

local    law — allowance    by    necessary    (Revenue    Act    of 

L916,  T.   I).  2453) 262,  263 

losses    from    casualty    or   theft 142,143 


408  GENERAL  INDEX. 


References  are  to  Pages. 


Deductions — Continued  page 

miscellaneous  expenses 129,  130 

mortgages — unpaid 141 

nonresident    estates — deduction    by 161-167 

charitable  and  similar  gifts — full  amount  deduct- 
ible   165 

charitable    and    similar    gifts — deduction    limited 

to  domestic  gifts 165,  166 

time  of  decedent's  death 166 

claims,  administration  expenses,  etc. — how  far  de- 
ductible  162,  163 

information  required  as  to  foreign  property 167 

property    previously    taxed — must    be    situated    in 

the  United  States — full  amount  deductible.  163,  164 
statutory    provision — proportionate    deduction....   161 

property   previously   taxed 148b-151 

where  property  is  included  in  gross  estate 150 

where   property   is   taken   in   exchange — proof   re- 
quired  150,  151 

provisions  of  Revenue  Act  of  1916 116-118 

states — deduction  of  federal  tax  by 138-141 

statutory  provision 116 

support  of  dependents 143-148b,  396-397 

taxes 

death  duties 134-137 

income  taxes 133,  134,  308,  309 

property  taxes 131-133,  308,  309 

Depositions 

commissioner    may    take 230,  231 

in  estate  tax  matters— form  790 380,  381 

Discount 

conditions   of  granting    (Revenue   Act   of   1916,   T.   D. 

2756) 303-306 

not  allowed  on  additional  assessment  (Revenue  Act  of 
1916,  T.  D.  2570) 293 


GENERAL  INDEX.  409 


References  are  to  Pages. 


Discount — Continued  PA0K 

rules   for  computation    (Revenue   Act  of  1910,  T.   D. 
2497).  .  .  .  275-278 

Dividends 

inclusion   in  gross  estate 20,  J71 

Domicile 

specific  cases 8 

tests  of 8 

Donees 

duties  of  (Revenue  Act  of  1916,  T.  D.  2454) 204-200 

notice  by   172 

Dower  and  courtesy 

election  barring  dower 30,     31 

estates  in  lieu  of — what  are 26,  27,     28 

inclusion    in    gross    estate 25,     26 

status  under  Revenue  Act  of  1916 28,     29 

under  state  inheritance   tax  statutes 31,     32 

Due  date  ♦ 

of  tax 196,  399 

E 

Entirety 

See  Joint  Interests 

Equitable  interests 

included   in  gross  estate 23 

Escheated  property 

taxability  of • 6 

Estate  tax 

computation    of    tax 12-1(5 

estates    subject    to 7 

general  nature 6 

general    scheme    of   stat  ute 3,       4 

not  a  direct   property   tax 4,       5 

not  a  legacy  tax 5,      0 

not    apportioned    among    beneficiaries 5 


410  GENERAL  INDEX. 


References  are  to  Pages. 


Estate  tax — Continued  pagk 

rates  of  tax 10-12 

time   of   taking   effect 4,  n. 

Examination 

of  records — may  be  made  by  commissioner 229,  230 

of  witnesses — commissioner  may   direct 230,  231 

Executors 

duty  to  file  return 183,  184 

duty  to  pay  tax 197,  222,  223 

duty  to  render  statement 231 

duty  to  give  sixty-day  notice 169,  170,  176 

foreign — information   required    from 193-195 

liability    for    tax — not    affected     by     distribution    of 
estate 223,  225 

Exemption 

See  Specific   Exemption 

Extension 

payment  of  tax — conditions  of  granting 209 

payment  of  tax — what  constitutes  "undue  hardship".  210 
payment  of  tax — extension  does  not  affect  interest. . . .  210 
payment  of  tax — extension  does  not  affect  time  to  file 

return 210 

return— time  to  file.  190-191,  294,  295,  296,  305,  306,  397-398 


F 

Fiduciary 

duties  of  (Revenue  Act  of  1916,  T.  D.  2454) 264-269 

when  to  give   notice 173,  177,  265 

when   to   file    return    (Revenue    Act    of   1916,    T.    D. 
2421) 255,  256 

Foreign  diplomat 

residence  of 8 

Forms 

for   estate   tax 353-390 


GENERAL  INDEX.  411 


References  are  to  Pages. 


6 

German  mark  PAGK 

valuation  of ll-r) 

Gifts  causa  mortis 

as  transfer  in  contemplation  of  death 45,     4<i 

Gleason  and  Otis 

work  on  inheritance  taxation — references  to 1,       8 

Good  will 

valuation  of 101-103,  394,  395 

Graves 

repair    of — deduction    for 122,  123 

Gross  estate 

general  character  of 17 

See  Probatable  Assets,  Dower  and  Courtesy,  Transfer  by 
Descent,  Joint  Interests,  Appointed  Property  and  In- 
surance. 

H 

Heirs 

duties  of  (Revenue  Act  of  1916,  T.  D.  2454) 264-269 

Household  effects 

how  returned — presumed  to  belong  to  husband  (Reve- 
nue Act  of  1916,  T.  D.  2529) 282-285 

valuation  of 105-108 

Husband  or  wife 

notice  by 172 

I 

Income 

accuring    after    death — not    included    in    gross    estate 

(T.   D.   2406) 249 

Increase 

in  estates  after  death — not  included  in  gross  estate. 93,  24!' 

in  tax  rates  in  October,  1917  (T.  D.  2535) 290-292 

Inheritance  taxes 

former    federal    legislation 1  • 


412  GENERAL  INDEX. 

References  are  to  Pages. 

Inheritance  taxes — Continued  page 

in  general 1,      2 

See  State  Inheritance  Taxes 

Insurance 

annuity  policies — computation  of  value 175 

date  when  insurance  provision  became  effective. ..  .85,    86 
distinction   between    insurance    payable   to    the    estate 

and  individual  insurance 79 

in  favor  of  the  estate 81,    82 

payment  where  tax  due — conditions 392,393 

premiums — payment   of    as   determining   character   of 

insurance 80,    81 

reservation  of  right  to  change  beneficiary 84 

rule  as  to  individual  insurance 83 

rule  under  Revenue  Act  of  1916 82 

statutory  provision 79 

war  risk   insurance — not   exempted 85 

what  is  individual  insurance — illustrations 83,     84 

Interest 

bonds — inclusion   in  gross  estate 19 

bonds — accrued  interest  included  in  gross  estate  (reve- 
nue Act  of  1916,  T.  D.  2483) 271 

notes  and  bonds — how  computed 98,     99 

Interest  on  tax 

excess  part  of  tax — notification  necessary 204 

fraudulent  return — effect  on  interest 399 

insufficient  payments 207 

not  affected  by  extension  of  time 210 

not  affected  by  rejected  claim  for  abatement 239 

opinion  of  collector  as  to  amount  due 207,  208 

original   part   of   tax 204 

payment    in    good    faith     of    amount    disclosed    by 

return 205-207 

payment  necessary  to  stop  interest 208,  200 

payments  made  too  late 207 

statutory  provisions 203 


(JMNKRAL  INDKX.  413 


References  are  to  Pages. 


Interest  on  tax — Continued  pack 

under  Revenue   Act  of  1916 210-213 

what     constitutes     notification — actual     notice     neces- 
sary  204,  205,  306,  307 

Intoxicating  liquors 

valuation  of , 115 

J 

Joint  bank  account 

duties  of  surviving  depositor 184 

included  in  gross  estate 58,  n. 

Joint  interests 

decision  under  state  statutes 66-71 

estates  in  entirety — inclusion  of 64 

joint   bank   accounts — inclusion   of 58,  n. 

joint  brokerage   accounts — inclusion  of 58,  n. 

statutory  provision 57 

survivorship   a   feature 57 

test   of  inclusion — consideration   paid 61-63 

time  of  creation  of  interest 64,    65 

Judgments 

valuation  of 103 

L 

Lien 

on  transferred  property  and  insurance 227 

release  of — conditions  of  granting 228,  229 

tax  a  lien  on  gross  estate 226 

where   property   sold 227 

Life  estates 

inclusion   in  gross  estate 22 

Loans 

payments  to  children — when  considered  loans 24,     25 

Local  law 

allowance  by  necessary  to  deduction 118,  143,  144,  148 

decisions  of  local  courts — effect  of 119,  120 


414  GENERAL  INDEX. 


References  are  to  Pages. 


Local  Law — Continued  page 

deductions — how  it  affects  (Revenue  Act  of  1916,  T.  D. 
2453) 262,  263 

Losses 

from  casualty  or  theft — deductibility 142,  143 

M 

Military  exemption 

claims    for— form    793 357,  358 

estate  of  Red  Cross  worker 10 

when    granted — persons    dying    in,    or    as    result,   of, 
service 9,     10 

Missionary 

residence  of 8 

Mortgages 

deductibility 141,  142 

N 

Nonresident  estates 

tax  limited  to  local  property 162 

Notes 

inclusion   in   gross   estate 19 

Notification 

time  when  effected — actual  notice  necessary 204,  205, 

306,  307 
P 
Paying  agents 

of    corporations — duties    of    (Revenue    Act    of    1916, 

T.    D.    2490) 271-274 

Payment  of  tax 

beneficiary     or    person     in     possession — payment     by 

(Revenue  Act  of  1916,  T.  D.  2490) 264-269 

by  bonds  or  uncertified  check 202 

by  check,  draft  or  money  order  conditions.  . .  .397,  398,  399 

discount   not   allowed 201,  202 

executor  to  pay 197 


CKNKRAL  INDEX.  415 


References  arc  to  Pages. 


Payment  of  tax — Continued  page 

extension   of   time 200,  210 

interest — accrual  of 203-209 

liberty  and  other  United  States  bonds — payment   with 

(T.  D.  2705,  2802,  2878,  2898,  2904,  2905) 207-299, 

312-350 

recovery  from   insurance   beneficiaries 200 

reimbursement  by  bureau — no  right  to 201 

remedy  against  transferee  or  insurance  beneficiary.  197,  198 

return  necessary 202 

right  of  beneficiaries  to  reimbursement 198-200 

when   payment   effected 196-197 

Penalties 

for  failure  to  file  notice  or  return 233,  234 

for  filing  false  notice  or  return 234,  235 

for  failure  to  exhibit  records  or  property 236,  237 

general  nature — specific  and  ad  valorem 235,  230 

undervaluation     of     property     as     constituting     false 
return 242 

Personal  property 

inclusion  in  gross  estate 18,     19 

Probatable  assets 

what    included    in 17-25 


R 

Real  property 

how  valued 94 

inclusion   in   gross  estate 18 

not  situated   in   United  States — not  included  in  gross 

estate 18,  302 

Receipts 

for  estate  tax— form  803 382 

Records 

See  Books  and  Records 


416  GENERAL  INDEX. 


References  are  to  Pages. 


Register  page 

of    corporations — duties    of    (Revenue    Act    of    1916, 

T.   D.   2490) 271-274 

Regulation 

original  estate  tax  (T.  D.  2378) 246 

Release  of  lien 

application  for — form  791 358-360 

Remainders 

inclusion    in    gross    estate 22 

Remit 

power  to  remit  penalties  or  forfeitures 218-220 

Rent 

inclusion   in   gross   estate 19 

Representatives 

of    nonresident    decedents — duties    (Revenue    Act    of 

1916,  T.  D.  2421) 252-255 

Resident 

residence    means    domicile 7 

Return 

by  executor 183,  184 

by  executor — form  706 360-373 

where  no  executor  appointed 185 

by  beneficiary 184 

by    beneficiaries    or   persons   in    possession    (Revenue 

Act  of  1916,  T.  D.  2372,  2454) 244,  245,  264-269 

by  collector  or  commissioner 186,  187 

by  fiduciary  (Revenue  Act  of  1916,  T.  D.  2421) . .  .255,  256 

by  surviving  joint   depositor 184,  185 

by   nonresident    estates 192-195 

place  to  file 194 

information  required  from  foreign  executor. . .  .194-195 
representative    of   nonresident    decedent — liability 

to  file  (Revenue  Act  of  1916,  T.  D.  2421) .  .252-255 
to  be  sent  to  commissioner  (Revenue  Act  of  1916, 
T.    D.    2691) 296,  297 


GENERAL  INDEX.  41' 


References  are  to  Pages. 


Return — Continued  page 

extension  of  time  to  Hie.  ..190-191,  294-296,  305-306,  397-39S 
instructions  for  executing  (Revenue  Act  of  1916,  T.  D. 

2513) 278,  281 

investigation  of 188-190 

manner   of   executing 191,  192 

place    to    file 188 

return  in  proper  form   accepted 185,  186 

statutory  provision 182-183 

supplemental  data 192 

time    for    filing 187,  188 

See,  also,  Tentative  Return. 


s 

Safe  deposit  companies 

when    to   give    notice 269 

Sales 

not    taxable   when   made   bona   fide   and   for   fair   con- 
sideration      56 

specific    cases    56,    57 

Savings  bank 

notice  by L73 

Schedule 

of  coupon  bonds  taken  in  payment  of  tax — form  761.   379 

of  registered   bonds   taken    in   payment    of   tax — form 

762 379.  380 

Separation  agreement 

taxability  as  transfer  intended  to  take  effect  at  or  after 

death 56 

Situs 

of  bonds  found  in   ('.  S 88 

of  bonds,  foreign  and  domestic   (Revenue  Act  of  1916, 
T.   D.   2530) 285-287 

of    foreign    checks 91 


418  GENERAL  INDEX. 


References  are  to  Pages. 


Situs — Continued  pack 

of  insurance  with  domestic  corporation 86 

of  insurance — policies  issued  by  domestic  corporation 

in  foreign  country 91,     92 

of  moneys  on  deposit  with  domestic  banks 88 

of  debts  due  by  domestic  debtors 8S 

of     property     transferred     by     decedent — how     deter- 
mined  86,     87 

property  used  in  British  War  Loan — stock  in  domestic 

corporations 89 

property  used  in  British  War  Loan — bonds  found  in 

United  States 89,    90 

of  stock  in  domestic  corporation 86 

Sixty-day  notice 

by    resident    estates 168-176 

by  executor 169,  170 

by   executor— form   704 353,  354 

by  others   than  executor 170,  171 

by    insurance    companies 174-176 

by   insurance   companies — form   787 355,  356 

where  no  executor  appointed 171,  172 

when  property  not  under  control  of  executor.  172-174 

statutory  provision 168 

under  Revenue  Act  of  1916 169 

by    nonresident    estates 176-181 

by  local  executor • 176 

by  executor — form   705 373-375 

by  person  in  possession 177 

comparison  of  rule  for  resident  estates 178 

notice  by  insurance  companies 180,  181 

by  insurance  companies — form   788 356,357 

by  transfer  agent 178-180 

by  transfer  agent — form  714 375,  376 

Specific  exemption 

deduction  of 161 


GENERAL  INDEX.  419 


littirences  are  to  I  * .  i  -_r  <  ■-. 


State  inheritance  taxes  pagk. 

held  deductible   (T.  D.  2395) 247,  348 

held  non-deductible  (T.  D.  2524) 282 

State  law 

effect  given  to  by  bureau 221,  222 

Statement 

may  be  required  from  executor 23] 

Statutes 

English 2 

Federal 2,      3 

Subpoena 

See  Witnesses 
Subpoena  duces  tecum 

for  use  by  revenue  agent — form  789 380 

Summary 

of   investigation   by  revenue   agent   or  collector — form 

722 377 

of  annual  sales  and  income,  and  invested  capital  and 

income— form  831-D 389,  390 

Supplemental  data 

S*c  Return 
Support  of  dependents 

deductibility 143-148,  390-397 

expenditure  of  the  money 148 

must  be  authorized  by  local  law 143,  144 

must   be   in   money 144 

person  must  be  actually  dependent 145-147 

time  for  determining  dependency 147 

rules  for  deduction    (Revenue  Act  of  191(5,  T.   D. 
2531) 287-29  I 

T 

Tables 

for    determining    value    of    life    interest     (Revenue    Act 
of  1916,  T.  D.  2626) 293.  294 


420  GENERAL  INDEX. 


References  are  to  Pages. 


Tables — Continued  page 

for  determining  value   of  annuities,   life   estates   and 

remainders 110,  111 

for  computing  tax 13,  14,    16 

of  statutes   243 

Tangible  property 

valuation  of   104 

Taxes 

death  duties— deductibility 134-137 

income  taxes— deductibility 133,  134,  308,  309 

on  property— deductibility 131-133,  308,  309 

Tentative  return 

conditions    of    filing    (Revenue    Act    of    1916,    T.    D. 

2415) 250-252 

when    may    be    filed    (Revenue    Act    of    1916,    T.    D. 

2756) 304,  305 

Texas 

community    property    in — one-half    to    be    included    in 
gross  estate  (Revenue  Act  of  1916,  T.  D.  2450) .  .259-262 
Thirty-day  notice 

by    beneficiaries    or   persons    in    possession    (Revenue 

Act  of  1916,  T.  D.  2372,  2454) 244,  245,  264-269 

by  representative   of   nonresident   decedent    (Revenue 

Act  of  1916,  T.  D.  2421) 252-255 

by    transfer    agent     (Revenue    Act    of    1916,    T.    D. 

2490) 271-274 

Transfer 

of  the  net  estate — the  subject  taxed 3 

Transfer  agents 

duties  of  (Revenue  Act  of  1916,  T.  D.  2454) 264-269 

right   to   transfer   stock   owned    by   nonresident    dece- 
dent  86-88,  391,  392 

Transfer  of  securities 

by  nonresident  estate — how  effected   (Revenue  Act  of 
*  1916,  T.  D.  2708) 299-301 


GENERAL  tNDEX.  42] 


References  are  to  Pages. 


Transfers  by  decedent  paoi 

statutory  provision 33 

transfers  prior  to  September  8,  1916 33-38 

constitutional  questions   37,    38 

decision  in   Shwab  v.  Doyle 35-37 

inclusion    under    Revenue    Act    of    1916    (T.    D. 

2513) 33,  34,  35,  279,  280 

transfers  in  contemplation  of  death 39-48 

advancements 48 

definition — testamentary    character    of    act.... 39,     40 

definition  in  Shwab  v.  Doyle 42-45 

different    from    transfers   intended    to   take    effect 

at  death  39 

distinguished   from  gifts   causa   mortis 45,     46 

specific  cases  46,    47 

state   court   definitions 40-42 

transfers  prior  to  Sept.  8,  1916 — taxable    (T.  D. 

2385) 246 

whether  transfer  made  in  contemplation  of  death 

a  question  of  fact 46 

transfers  intended  to  take  effect  at  or  after  death. .  .48-57 

contract  by  grantee  to  pay  annuity 52 

deposit  of  money  in  trust 55 

property  placed  in  escrow 55 

provisions  of  state  statutes 48 

reservation    of    power    to    control    administration 

of  trust 54,  393,  394 

reservation  of  powers  of  revocation 52,     53 

reservation  of  power  to  vote  stock 55 

reservation   of  right   to  occupy  property 55,     56 

sales — when   not   taxable 56,    57 

transfers  with  reservation  of  income 49,     50 

transfers  with  reservation  of  part  of  income 51 

Treasury  decisions 

relating  to  estate  tax 244-352 


422  GENERAL  INDEX. 


References  are  to  Pages. 


Trustees  PAGE 

notice   by    172,  173 

duties  of  (Revenue  Act  of  1916,  T.  D.  2454) 264-269 

u 

Undervaluation  of  property 

may  subject  executor  to  penalty 242 

United  States  bonds 

to  be  included  in  gross  estate   (Revenue  Act  of  1916, 
T.  D.  2449) 256-258 

V 

Valuation  of  property 

annuities 109-114 

accounts  receivable,  claims  and  judgments 103 

bank  deposits  100 

bonds 95,     96 

contingent  interests    114 

crops 104,  105 

German  mark   115 

good  will    101-103 

interest   in  business 101,  394,  395 

intoxicating   liquors    115 

listed   securities    05,     96 

market,  or  sale,  value  taken 03 

patents,  trade  marks  and  copyrights 103 

notes   apparently   barred 09,  100 

personal  and  household  effects 105-108 

pledged   securities    07,     98 

promissory  notes  yo 

securities  pledged  by  British  Government— full  value 

taken 89,90  n. 

stock   of   close   corporations 06,     97 

stock   of  close  corporation   where   option   to   purchase 

given 103  n- 


(JKNKKAL  INDEX.  123 


References  ar<-  to  Pages. 


Valuation  of  property — Continued 

tangible  property 104 

t  est  of  sales 94 

time  for  determining  value 93 

unlisted    securities    90 

w 

Warehouses 

when  to  give  notice 269 

Witnesses 

examination  of    230,  231 

may   be   subpoenaed 232 


[Total   Number  of   Pages,  443] 


V, 


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